Clark v. Barnard
108 U.S. 436 (1883)

Annotate this Case

U.S. Supreme Court

Clark v. Barnard, 108 U.S. 436 (1883)

Clark v. Barnard

Decided May 7, 1883

108 U.S. 436

APPEAL FROM THE CIRCUIT COURT OF THE UNITED

STATES FOR THE DISTRICT OF MASSACHUSETTS

Syllabus

1. The B. H. & E. Railroad, a corporation created by the State of Connecticut, purchased the franchises and railroad of the H. P. & F. Railroad, a corporation created under the laws of Rhode Island and Connecticut. The Legislature of Rhode Island ratified the sale, and authorized the B. H. & E. Company to exercise the rights, privileges, and powers of the H. P. & F. Company. Held that the B. H. & E. Company thereby became the legal successor of the H. P. & F. Company in Rhode Island, and, in respect to its railroad in Rhode Island, a corporation of that state.

2. The State of Rhode Island authorized by an act of its legislature the B. H. & E. Company to extend within the limits of the state the road thus acquired. The act further contained the following proviso:

"This act shall not go into effect unless the said B. H. & E. Company shall, within ninety days from the rising of this General Assembly, deposit in the office of the General Treasurer their bond, with sureties satisfactory to the governor of this state in the sum of $100,000, that they will complete their said road before the first day of January, A.D. 1872."

Within the time named, the requisite bond was filed in the sum of $100,000 conditioned as follows:

"Now, therefore, if said B. H. & E. Company shall complete their said railroad before the first day of January, A. n. 1872, then the afore-written obligation shall be void; otherwise be and remain in full force and effect,"

and as the requisite security for the payment of the bond, a loan certificate of the City of Boston for $100,000 was deposited with the state treasurer. The B. H. & E. Company became bankrupt.

Page 108 U. S. 437

The assignees in bankruptcy filed a bill in equity to restrain the treasurer of the state from collecting the certificate. The treasurer demurred on the ground that the real party in interest was the state. In the course of the proceedings, the money was paid into court on an interlocutory decree. The state then came in and claimed it.

Held:

(1) That the voluntary appearance by the state disposed of the demurrer and conferred jurisdiction to adjudicate upon the rights of the state. The case distinguished from Georgia v. Jesup,106 U. S. 458.

(2) That the sum named in the bond in question was not a penalty to secure the performance of a condition which could be discharged on payment of such damages as might be proved to have arisen from nonperformance, but that it was in the nature of a statutory penalty for the nonperformance of a statutory duty, and that it was not necessary for the state to show any actual damage or injury from the breach in order to be entitled to recover when the breach was proved.

The law and cases on this subject considered and reviewed.

Bill in equity by the assignees in bankruptcy of the Boston, Hartford & Erie Railroad to restrain the Treasurer of the State of Rhode Island from receiving $100,000 in the possession of the court, the proceeds of a loan certificate of the City of Boston, which was lodged with the state by the bankrupt as security for the performance of its bond for that amount given to the state in pursuance of law to secure the construction of an extension of its road in Rhode Island, the extension never having been made. The facts appear in detail in the opinion of the Court. The main questions discussed in argument were the power of the corporation to make the agreement with the state; the rights of the parties in the absence of the state; the effect of an appearance by the state for the purpose of claiming the fund after it had been paid into court, and the measure of damages on the breach of the condition of the bond.

Page 108 U. S. 442

MR. JUSTICE MATTHEWS delivered the opinion of the Court.

The appellees, who were complainants below, filed their bill in equity as assignees in bankruptcy of the Boston, Hartford & Erie Railroad Company, against Samuel Clark, General Treasurer of the State of Rhode Island, and the City of Boston and Frederick U. Tracey, its Treasurer. The bill alleged that the Boston, Hartford & Erie Railroad Company was a corporation created by the States of Connecticut and Massachusetts for the purpose of building, acquiring, and operating a railroad from Boston, in Massachusetts, to Willimantic, in Connecticut, and from Providence, in Rhode Island, to Willimantic, and from Willimantic through Waterbury to the state line of Connecticut, and thence to Fishkill, in New York; that the directors of the company, without authority from the corporation or by law, applied to the Legislature of Rhode Island in 1869, and obtained the passage of an act entitled "An act in addition to an act to ratify and confirm the sale of the Hartford, Providence & Fishkill Railroad to the Boston, Hartford & Erie Railroad Company," by which the company was authorized to locate and construct a railroad in extension of their line of railroad purchased of the Hartford, Providence & Fishkill Railroad Company, commencing at their depot in Providence, thence running to the easterly line of the state in or near the Village

Page 108 U. S. 443

of Valley Falls, to meet and connect with a Massachusetts railroad extending through North Attleborough from Boston, so as to make a continuous line of railroad in a northerly and southerly direction between Providence and Boston; that this act contained a provision in the following terms:

"This act shall not go into effect unless the said Boston, Hartford & Erie Railroad Company shall, within ninety days from the rising of this General Assembly, deposit in the office of the General Treasurer their bond, with sureties satisfactory to the governor of this state, in the sum of $100,000, that they will complete their said road before the first day of January, A.D. 1872."

That this condition was not complied with, and that the said act therefore never took effect and is wholly null and void; that after the passage of the act, the directors and officers of the corporation, without authority and in abuse of their trust and duty, filed with one Samuel Parker, then the General Treasurer of Rhode Island, a paper, purporting to be the bond of the corporation, but without sureties, and fraudulently took of the funds of the corporation the sum of $100,000, and deposited the same with the City Treasurer of Boston in exchange for the obligation of that city, a copy of which is as follows:

"Temporary Loan, City of Boston"

"$100,000 No. 6"

"This certifies that, for value received, there will be due from the City of Boston, payable at the office of the City Treasurer, on demand, after the first day of December next, to the General Treasurer of the State of Rhode Island, or order, the sum of $100,000, with interest at the rate of seven percent per annum, in current funds."

"This loan being authorized by an order of the city council passed the ninth day of June, 1869, to anticipate the income of the present financial year."

"Interest will not be allowed after this note is due."

"June 28, 1869"

"ALFRED T. TURNER, Auditor"

"FRED. U. TRACEY, Treasurer"

"NATH'L B. SHURTLEFF, Mayor"

Page 108 U. S. 444

That the directors and officers of the company, without consideration and without authority, deposited this certificate and obligation with the said Parker, who received the same without warrant of law, and thereupon held the same to the use of the railroad company; that the corporation never accepted the act of the legislature recited; that the railroad authorized thereby has never been built, nor any work done thereon, nor has the State of Rhode Island, nor any citizen thereof, suffered any damage or loss by reason thereof; that the General Assembly of Rhode Island considered that the filing of the certificate and obligation of the City of Boston was not a compliance with the act, and did not ratify the taking of the same till after the bankruptcy of the railroad company; that said bankruptcy was adjudicated on October 21, 1870, and the complainants became assignees in bankruptcy of said company from that date, and entitled to the money represented by the said certificate; that Samuel Parker having died, the respondent Clark succeeded him as General Treasurer of Rhode Island, and came into possession of the said certificate, which, it is alleged, however, he holds wrongfully, and in his individual and not his official capacity, and to the use of the complainants, but which, nevertheless, he threatens to collect and withhold from them the proceeds thereof.

The prayer of the bill is

"That the said respondent Clark may be decreed to have no right, title, or interest in or to the said paper writing A, or in or to the said money so deposited with the said respondent Tracey, or to any part thereof, and that he may be decreed to assign and deliver over the said paper A to your orators, and may be enjoined and restrained from presenting the same to the said respondent Tracey, or to the said City of Boston, or from receiving any money or payment whatsoever thereon or therefor, or any part thereof, or from receiving or holding the said sum of $100,000, or any part thereof, from the said respondent Tracey, or the said City of Boston, and that the said respondent Tracey and the said City of Boston may be decreed to pay over to your orators, as assignees as aforesaid, the said sum of $100,000, with interest thereon, and may be enjoined and restrained from paying the same, or any part thereof,

Page 108 U. S. 445

or any money on account thereof, to the said respondent Samuel Clark, the General Treasurer of the State of Rhode Island, and that your orators may have such other and further relief as to your honors shall seem meet, and as the nature and circumstances of the case shall require."

To this bill a demurrer was filed by Clark for want of jurisdiction, on the ground that it was, in substance, a suit by citizens of one state against the State of Rhode Island. This demurrer was overruled. Clark then filed his answer, denying the material allegations of the bill, asserting that the transaction was with the State of Rhode Island, through the treasurer in his official capacity, and insisting upon the immunity of the state from suit by citizens of other states as a defense. The cause came on for hearing upon the pleadings and proofs, when an interlocutory decree was passed, April 15, 1878, ordering the payment of the money due from the City of Boston upon the loan certificate into the registry of the court, with liberty to the defendant Clark to take and file evidence in support of any claim for damages by reason of the breach of the bond of the Boston, Hartford & Erie Railroad Company to the State of Rhode Island, and further ordering that on final hearing, and upon filing in court the certificate of indebtedness, the General Treasurer of the State of Rhode Island should have and recover of the said sum in the registry such portion, or the whole thereof, as should amount to the sum, if any, for which any surety might or for which the principal obligor in said bond would be liable, upon the evidence, either for any penalty or damages by reason of the nonperformance and breach of the conditions of said bond.

On May 3, 1878, the City of Boston paid into court the sum of $100,000, and, in addition, the interest accrued to December 1, 1869, and subsequently, on February 25, 1880, an additional amount for interest in full. On March 17, 1880, the following claim of the State of Rhode Island was filed by the allowance of the court as of April 15, 1878, after the entry of the interlocutory decree of that date:

Page 108 U. S. 446

"And now comes the State of Rhode Island, by the undersigned, the same counsel who have appeared for the defendant Clark, General Treasurer of said state, and, without prejudice to the demurrer of said General Treasurer, claims the fund in the registry of the court."

This was signed by counsel.

On final hearing, the fund was awarded to the appellees, and from that decree Clark, General Treasurer of the State of Rhode Island, and the State of Rhode Island appealed. The state itself is a party to the appeal bond, which recites that the State of Rhode Island was an intervenor and claimant of the fund in court and that a decree was rendered against it as such.

The bond executed and delivered by the Boston, Hartford & Erie Railroad Company to the State of Rhode Island is as follows:

"Know all men by these presents that the Boston, Hartford & Erie Railroad Company, a corporation created by the General Assembly of the State of Connecticut, is held and firmly bound to the State of Rhode Island and Providence Plantations in the sum of one hundred thousand dollars, to be paid to said State of Rhode Island and Providence Plantations, to which payment, well and truly to be made, the said corporation doth bind itself and its successors firmly by these presents."

"The condition of the aforewritten obligation is such that whereas, by an act of the General Assembly of said State of Rhode Island entitled 'An act in addition to an act entitled an act to ratify and confirm the sale of the Hartford, Providence & Fishkill Railroad to the Boston, Hartford & Erie Railroad Company,' passed at the January session, 1869, said Boston, Hartford & Erie Railroad Company are authorized and empowered to locate, lay out, and construct a railroad in extension of their line of railroad purchased of the Hartford, Providence & Fishkill Railroad Company, commencing at a point in their said purchased railroad at or near their freight depot in the City of Providence; thence running westerly and northerly by a line westerly of the state's prison, a little easterly of the Rhode Island Locomotive Works, and thence by nearly a straight line and crossing or running near to Leonard's Pond, and thence passing between the

Page 108 U. S. 447

Villages of Pawtucket and Lonsdale, and over and above the Providence & Worcester Railroad; thence continuing to the easterly line of the state, in or near the Village of Valley Falls:"

"Now therefore if said Boston, Hartford & Erie Railroad Company shall complete their said railroad before the first day of January, A.D. 1872, then the aforewritten obligation shall be void; otherwise be and remain in full force and effect."

"In testimony whereof, said Boston, Hartford & Erie Railroad Company have caused this instrument to be signed by John S. Eldredge, its president, and its corporate seal to be thereto affixed, this twenty-third day of June, 1869."

"[L. S.]"

"BOSTON, HARTFORD AND ERIE R. CO.,"

"By JOHN S. ELDREDGE, President"

"Executed in presence of --"

"SAMUEL CURREY"

"H. S. BARRY"

The testimony taken in the cause pursuant to the interlocutory decree, it is admitted, failed to prove any damage or loss occasioned to the State of Rhode Island or to any of its citizens or inhabitants by reason of the failure of the railroad company to comply with the conditions of this bond.

The first question for determination on this appeal is that of jurisdiction, raised first by the demurrer and afterwards by the answer of Clark, General Treasurer of the State of Rhode Island, on the ground that the suit was in effect brought against a state by citizens of another state, contrary to the Eleventh Amendment to the Constitution of the United States.

We are relieved, however, from its consideration by the voluntary appearance of the state in intervening as a claimant of the fund in court. The immunity from suit belonging to a state, which is respected and protected by the Constitution within the limits of the judicial power of the United States, is a personal privilege which it may waive at pleasure, so that in a suit, otherwise well brought, in which a state had sufficient interest to entitle it to become a party defendant, its appearance in a court of the United States would be a voluntary submission to its jurisdiction, while of course those courts are always open to it as a suitor in controversies between it and

Page 108 U. S. 448

citizens of other states. In the present case, the State of Rhode Island appeared in the cause and presented and prosecuted a claim to the fund in controversy, and thereby made itself a party to the litigation to the full extent required for its complete determination. It became an actor as well as defendant, as by its intervention the proceeding became one in the nature of an interpleader, in which it became necessary to adjudicate the adverse rights of the state and the appellees to the fund, to which both claimed title. The case differs from that of Georgia v. Jesup,106 U. S. 458, where the state expressly declined to become a party to the suit, and appeared only to protest against the exercise of jurisdiction by the court. The circumstance that the appearance of the state was entered without prejudice to the demurrer of Clark, the General Treasurer does not affect the result. For that demurrer could not reach beyond the question of the right to sue Clark by reason of his official character, which became insignificant when the state made itself a party, and in point of fact the bill was framed to avoid the objection, by charging Clark as a wrongdoer in his individual capacity. For the groundwork of the bill, whether it be regarded as directed against the officer or the state, is that the transaction throughout was void as ultra vires the corporation. And this presents the next question to be considered. That question arises and is to be determined upon the following statement of facts.

The Boston, Hartford & Erie Railroad Company was originally created a corporation by the laws of Connecticut. Its charter conferred authority upon it in these terms:

"Said Boston, Hartford & Erie Railroad Company may purchase . . . the franchise, the whole or any part of the railway or railway property of any railroad company located in whole or in this state, whose line or a portion of whose line of railway, constructed or chartered, now forms part of a railway line from the harbor of Boston, passing through Thompson to Willimantic, and from Providence through Willimantic to Hartford, Waterbury, and thence toward the North River, with

Page 108 U. S. 449

the purpose of reaching a point at or near Fishkill in the State of New York, . . . and said Boston, Hartford & Erie Railroad Company may make any lawful contract with any other railway company with which the track of said railroad may connect in relation to the business or property of the same, and may take lease of any railroad, or may lease their railway to, or may make joint stock with, any connecting railway company in the line of, and forming a necessary part of, and running in the same general direction as, their said route, and between its terminal points."

In pursuance of this authority, the Boston, Hartford & Erie Railroad Company purchased the franchises and railroad of the Hartford, Providence & Fishkill Railroad Company. This latter company was a consolidated corporation, deriving its existence and powers from the laws both of Connecticut and Rhode Island, whose road, as defined in the acts of incorporation, constituted a line within the general description contained in the section from the charter of the Boston, Hartford & Erie Railroad Company, already quoted. By a subsequent act of the Legislature of Rhode Island the sale and transfer of the Hartford, Providence & Fishkill Railroad, its property and franchises, to the Boston, Hartford & Erie Railroad Company was ratified and confirmed so far as said railroad was situated in that state, and it was thereupon further enacted that the

"Said Boston, Hartford & Erie Railroad Company, by that name, shall and may have, use, exercise, and enjoy all the rights, privileges, and powers heretofore granted and belonging to said Hartford, Providence & Fishkill Railroad Company and be subject to all the duties and liabilities imposed upon the same by its charter and the general laws of this state."

The Hartford, Providence & Fishkill Railroad Company was without question, so far as it owned and operated a railroad within the State of Rhode Island, a corporation in and of that state, and the Boston, Hartford & Erie Railroad Company became its legal successor in that state as owner of its property, and exercising its franchises therein, and became therefore in respect to its railroad in Rhode Island, a corporation in and of that state.

Page 108 U. S. 450

Thereafter, in January, 1869, the Legislature of Rhode Island passed the act out of which the present litigation has grown, entitled

"An act in addition to an act entitled 'An act to ratify and confirm the sale of the Hartford, Providence & Fishkill Railroad to the Boston, Hartford & Erie Railroad Company.'"

In its first section, it is enacted as follows:

"The Boston, Hartford & Erie Railroad Company, a corporation created by the General Assembly of the State of Connecticut, are hereby authorized and empowered to locate, lay out, and construct a railroad in extension of their line of railroad by them purchased of the Hartford, Providence & Fishkill Railroad Company, commencing at a point in their said purchased railroad at or near their freight depot in the City of Providence; thence running westerly and northerly by a line westerly of the state prison, a little easterly of the Rhode Island Locomotive Works, and thence by nearly a straight line, and crossing or running near to Leonard's Pond (so called), and thence passing between the Villages of Pawtucket and Lonsdale, and over and above the Providence & Worcester Railroad; thence continuing to the easterly line of the state in or near the Village of Valley Falls, there to meet and connect with a railroad extending westerly through North Attleborough from the direction of Boston, authorized by the Commonwealth of Massachusetts."

The eighth section of the act is as follows:

"Said railroad, when the same shall have been constructed, shall be managed and protected in all respects according to the provisions of, and be subject to, an act entitled 'An act to incorporate the Providence & Plainfield Railroad Company,' and the several acts in addition to and amendment thereof, and the general laws of the state."

The act thus referred to as the "Act to incorporate the Providence & Plainfield Railroad Company" was the charter of the corporation by that name in the State of Rhode Island, that, by consolidation with a Connecticut company, formed the Hartford, Providence & Fishkill Railroad Company.

Page 108 U. S. 451

The twelfth section of the act, recited in the complainant's bill, is as follows:

"This act shall not go into effect unless the said Boston, Hartford & Erie Railroad Company shall, within ninety days from the rising of this General Assembly, deposit in the office of the General Treasurer their bond, with sureties satisfactory to the governor of this state, in the sum of $100,000, that they will complete their said road before the first day of January, A.D. 1872."

This act of the Legislature of Rhode Island was duly accepted by the stockholders of the Boston, Hartford & Erie Railroad Company; the bond required by the twelfth section, as already set out, was executed and delivered, and the certificate of indebtedness, in lieu of sureties, was given by the company and accepted by the state.

It is now argued by counsel for the appellees that the party which, in all these transactions, was dealing with the State of Rhode Island, was the Boston, Hartford & Erie Railroad Company, in its character as a corporation of the State of Connecticut; that, as such, it had no power, under the charter granted by that state, to build or own a railroad directly connecting Boston and Providence, nor had it, as such, any capacity to receive a grant of such a franchise; that consequently everything done or attempted in that behalf was ultra vires and void.

But the Boston, Hartford & Erie Railroad Company was also a corporation of Rhode Island. As such, it owned and operated a railroad within that state, and had received and exercised franchises under its laws, to which it was in all respects subject. It was the assignee of the road and rights connected therewith, formerly belonging to the Hartford, Providence & Fishkill Railroad Company, and it was this corporation, dwelling and acting in Rhode Island, that the legislature, by the act in question, authorized to exercise the additional powers it conferred.

If it had had no previous existence as a corporation under the laws of Rhode Island, it would have become such by virtue of the act in question. For although, as a Connecticut corporation,

Page 108 U. S. 452

it may have had no capacity to act or exist in Rhode Island for these purposes, and no capacity by virtue of its Connecticut charter to accept and exercise any franchises not contemplated by it, yet the natural persons, who were corporators, might as well be a corporation in Rhode Island as in Connecticut, and, by accepting charters from both states, could well become a corporate body, by the same name and acting through the same organization, officers, and agencies, in each, with such faculties in the two jurisdictions as they might severally confer. The same association of natural persons would thus be constituted into two distinct corporate entities in the two states, acting in each according to the powers locally bestowed, as distinctly as though they had nothing in common either as to name, capital, or membership. Such was in fact the case in regard to this company, so that in Rhode Island it was exclusively a corporation of that state, subject to its laws and competent to do within its territory whatever its legislation might authorize.

"Nor do we see any reason [as was said by this Court, Mr. Justice Swayne, delivering its opinion in Railroad Company v. Harris, 12 Wall. 65, 79 U. S. 82], why one state may not make a corporation of another state, as there organized and conducted, a corporation of its own, quo ad hoc any property within its territorial jurisdiction. That this may be done was distinctly held in Ohio & Mississippi Railroad Company v. Wheeler, 1 Black 297."

The same view was taken in Railway Company v. Whitton, 13 Wall. 270; in Railroad Company v. Vance,96 U. S. 459, and in Memphis & Charleston Railroad Company v. Alabama,107 U. S. 581, decided at the present term. The question of the powers of the Boston, Hartford & Erie Railroad Company as a corporation in Rhode Island and of the legal effect of its acts and transactions performed in that state is to be determined exclusively by the laws of that state, and not by those of Connecticut, which have no force beyond its own territory. It results, therefore, that the doctrine of ultra vires, as here urged by the appellees, has no place in this controversy.

Page 108 U. S. 453

It is, however, urged on behalf of the appellees -- and this was the ground on which the decree below proceeded -- that the obligation required by the statute and given by the company was a bond, in the penal sum of $100,000, conditioned that the company would completely build its road within the period limited, upon which no recovery can be had, except for such damages as may be shown to have resulted to the State of Rhode Island from the breach of its condition; that no damage on that account is proven, it being in fact admitted that none actually resulted; that the certificate of indebtedness and the fund which has arisen from its payment were pledged merely, in lieu of sureties, as collateral security for the satisfaction of the bond, and that consequently the claim of the State of Rhode Island against it having thus failed, that fund reverts to the appellees.

The proposition of counsel for the appellees, as stated by them, is that

"from a period at least as early the year 1650 down to the present time, bonds have constituted a distinct class of instruments, the effect of which is always the same, in the same sense that the effect of a conveyance to A. and his heirs is always the same. Such is the rule of equity. Such was the effect of the statutes. Consequently, if in a particular case parties have expressed their obligation in the form of a bond, their liability is thereby determined to be an obligation to perform the condition or pay the damages actually sustained from nonperformance thereof,"

and, as a statement of the rule, they cite the following passage, 2 Sedgwick Meas.Dam. (7th ed.) 259, note:

"Of course, in this class of agreements as in all others, when the contract takes the ordinary form of a penal bond, the sum fixed will invariably be regarded as a penalty, and this might well be put at the present day, on the ground of intention, as derived from the writing itself, for this form of instrument is in such common use that persons who resort to it must be held to have in view its legal consequences."

While this may be accepted as a sufficiently accurate statement of the general rule as to bonds with conditions designed

Page 108 U. S. 454

as an indemnity between private persons for nonperformance of a collateral agreement, yet in respect to such cases, it cannot be considered as universally true.

"It is often a doubtful question [said the Supreme Judicial Court of Massachusetts in Hodges v. King, 7 Met. 583, 587], whether the sum stipulated to be paid on the nonperformance of a condition is in the nature of a penalty, or is the amount settled by the parties for the purpose of making that certain which would be otherwise uncertain. . . . The bond has indeed a condition, but that is a matter of form and cannot turn that into a penalty which, but for the form, is an agreement to pay a precise sum under certain circumstances."

So that it cannot correctly be said to be true in all such cases that the intention to treat the sum named in the bond as a penalty to secure the performance of the condition, and to be discharged on payment of damages arising from nonperformance, can be inferred as a rule of law or a conclusive presumption from the mere form of the obligation.

Originally at law, in case of breach of the condition of a bond, the amount recoverable was that named in the obligation. So that if the condition is impossible either in itself or in law, the obligation remains absolute. As

"if a man be bound in an obligation, etc., with condition that if the obligor do go from the Church of St. Peter in Westminster to the Church of St. Peter in Rome within three hours, that then the obligation shall be void. The condition is void and impossible, and the obligation standeth good."

So, again, if the condition is against a maxim or rule in law, as

"if a man be bound with a condition to enfeoff his wife, the condition is void and against law because it is against the maxim in law, and yet the bond is good."

Co.Lit. 206b. So where the condition is possible at the date of the instrument and becomes impossible subsequently, the obligation does not become thereby discharged unless the impossibility of performance was the act of God, or of the law, or of the obligee. Accordingly, it was held by this Court in Taylor v. Taintor, 16 Wall. 366, that when a person arrested in one state on a criminal charge, and released under

Page 108 U. S. 455

his own and his bail's recognizance that he will appear on a day fixed and abide the order and judgment of the court on process from which he has been arrested, goes into another state, and, while there, is, on the requisition of the governor of a third state, for a crime committed in it, delivered up, and is convicted and imprisoned in such third state, the condition of the recognizance has not become impossible by act of law so as to discharge the bail;

"the law which renders the performance impossible, and therefore excuses failure, must be a law operative in the state when the obligation was assumed, and obligatory in its effects upon her authorities."

The ground, nature, and limits of the jurisdiction of courts of equity to relieve against penalties in such instruments is well stated by Mr. Justice Story in this language:

"In short, the general principle now adopted is that, wherever a penalty is inserted merely to secure the performance or enjoyment of a collateral object, the latter is considered as the principal intent of the instrument, and the penalty is deemed only as accessory, and therefore as intended only to secure the due performance thereof or the damage really incurred by the nonperformance. In every such case, the true test generally, if not universally, by which to ascertain whether relief can or cannot be had in equity, is to consider whether compensation can be made or not. If it cannot be made, then courts of equity will not interfere. If it can be made, then, if the penalty is to secure the mere payment of money, courts of equity will relieve the party upon paying the principal and interest. If it is to secure the performance of some collateral act or undertaking, then courts of equity will retain the bill, and will direct an issue of quantum damnificatus, and when the amount of the damages is ascertained by a jury, upon the trial of such an issue, they will grant relief upon payment of such damages."

Eq.Jur. § 1314.

And Mr. Adams, in his Treatise on Equity, 6th Am. ed. 107, says, on the same subject:

"The equity for relief against enforcement of penalties originates in the rule which formerly prevailed at law, that, on breach of a contract secured by penalty, the full penalty might be enforced, without regard to the damage sustained. The court of

Page 108 U. S. 456

chancery, in treating contracts as matters for specific performance, was naturally led to the conclusion that the annexation of a penalty did not alter their character; and, in accordance with this view, would not, on the one hand, permit the contracting party to evade performance by paying the penalty, and, on the other hand, would restrain proceedings to enforce the penalty on a subsequent performance of the contract itself, viz., in the case of a debt, on payment of principal, interest, and costs, or in that of any other contract, on reimbursement of the actual damage sustained."

It has accordingly been uniformly held, in cases too numerous for citation, that courts of equity will not interfere in cases of forfeiture for the breach of covenants and conditions where there cannot be any just compensation decreed for the breach, for, as was said by Lord Chancellor Macclesfield, in Peachy v. Duke of Somerset, 1 Strange 447; S.C. Prec.Ch. 568; 2 Eq.Cas.Abr. 227, "it is the recompense that gives this Court a handle to grant relief."

The application of this principle becomes more manifest in cases where a public interest or policy supervenes, as where, for noncompliance by stockholders in corporations engaged in undertakings of a public nature, with the terms of payment of installments due on account of their shares, by which a forfeiture of the stock and of all previous payments thereon has been incurred and declared, the courts refuse to grant relief. Sparks v. Proprietors of Liverpool Waterworks, 13 Ves. 428; Prendergast v. Turton, 1 You. & Col.Ch. 98; Naylor v. South Devon Railway Company, 1 De G. & Sm. 32; Sudlow v. Dutch Rhenish Railway Company, 21 Beav. 43.

In the case of Sparks v. Proprietors of Liverpool Waterworks, 13 Ves. 433, Sir Wm. R. Grant, M.R., said:

"The parties might contract upon any terms thought fit, and might impose terms as arbitrary as they pleased. It is essential to such transactions. This struck me as not like the case of individuals. If this species of equity is open to parties engaged in these undertakings, they could not be carried on. . . . Why is not this equity open to contractors for government

Page 108 U. S. 457

loans? Why may not they come here to be relieved when they have failed in making their deposit? And if they could have relief, how could government go on? It would be just as difficult for these undertakings to go on. If compensation cannot be effectually made, it ought not to be attempted."

Accordingly, where any penalty or forfeiture is imposed by statute upon the doing or omission of a certain act, there courts of equity will not interfere to mitigate the penalty or forfeiture, if incurred, for it would be in contravention of the direct expression of the legislative will. Story's Eq.Jur. § 1326. Lord Chancellor Macclesfield said, in Peachy v. Duke of Somerset, 1 Strange 477:

"Cases of agreements and conditions of the party and of the law are certainly to be distinguished. You can never say the law has determined hardly, but you may that the party has made a hard bargain."

In Powell v. Redfield, 4 Blatchford 45, an application was made in equity to restrain suits upon a bond given in pursuance of the revenue laws of the United States, which was denied on the ground that a court of equity had no right to interfere, and, by injunction or decree, to virtually repeal the express provisions of a positive statute or defeat their operation in the particular case.

In Benson v. Gibson, 3 Atk. 395, Lord Hardwick said:

"Nor is it like the case of bonds given as a security not to defraud the revenue, because there, where a person is guilty of a breach, it is considered in law as a crime, and this court will not relieve for that reason."

The case of Treasurer v. Patten, 1 Root 260, was an action for the penalty of a bond given to oblige the defendant to observe the laws respecting excise, in which there was a verdict for the plaintiff and the

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