The contracts entered into by the United States and the Pacific
Mail Steamship Company for carrying the mails by the latter between
San Francisco and certain Asiatic ports, considered.
Held:
1. That the company has no claim to compensation other than sea
postage for carrying them in vessels which had not been accepted by
the Postmaster General.
2. That it is entitled to recover, under the contract of Aug.
23, 1873, for services performed, pursuant to its terms, in vessels
which he had, under the contract of Oct. 16, 1866, accepted.
3. That the annulment of the contract by the Act of March 3,
1875, c. 128, does not affect the company's claim for such services
on a voyage commenced before that date.
The facts are stated in the opinion of the Court.
MR. JUSTICE MILLER delivered the opinion of the Court.
These are cross-appeals from a judgment of the Court of Claims.
The Pacific Mail Steamship Company asserted in that court a claim
for $531,666.66, and recovered a judgment for $41,666.66. The
United States desire to reverse this latter judgment. The company
seeks to recover here the full sum claimed below.
The suit grows out of a contract for carrying the mail from San
Francisco to certain Asiatic ports. The facts, as found by the
Court of Claims, and so far as is necessary to our decision, will
be stated as we proceed.
The steamship company entered, on the 16th of October, 1866,
into a contract with the United States to carry a monthly mail from
San Francisco to China and Japan, via the Sandwich Islands, for the
sum of $500,000 per annum, for a period of ten years.
These mails were to be carried in first-class American
seagoing
Page 103 U. S. 722
side-wheel vessels of from 3,500 to 4,000 tons burden, to be
inspected and accepted by the Postmaster General. The company, in
due time, entered upon the discharge of this duty. The steamships
Colorado, Great Republic, China, Japan, America, and
Alaska were duly inspected and were accepted by the
government for that service. They had been in actual use in
performing the contract for several years, when Congress by the Act
of June 1, 1872, c. 256, making appropriations for the service of
the Post Office Department for the next fiscal year, enacted as
follows:
"SEC. 3. . . . For steamship service between San Francisco,
Japan, and China, five hundred thousand dollars, and the Postmaster
General is hereby authorized to contract with the lowest bidder,
within three months after the passage of this act, after sixty
days' public notice, for a term of ten years, from and after the
first day of October, eighteen hundred and seventy-three, for the
conveyance of an additional monthly mail, on the said route, at a
compensation not to exceed the rate per voyage now paid, under the
existing contracts, and upon the same conditions and limitations as
prescribed by existing acts of Congress in reference thereto, and
the respective contracts made in pursuance thereof; and the
contractors, under the provisions of this section, shall be
required to carry the United States mails during the existence of
their contracts without additional charge, on all the steamers they
may run upon said line, or any part of it, or any branch or
extension thereof,
provided that all steamships hereafter
accepted for said service shall be of not less than four thousand
tons register each, and shall be built of iron, and, with their
engines and machinery, shall be wholly of American construction,
and shall be so constructed as to be readily adapted to the armed
naval service of the United States in case of war, and, before
acceptance, the officers by whom they are inspected shall report to
the Secretary of the Navy and the Postmaster General whether this
condition has been complied with. . . . And the government of the
United States shall have the right, in the case of war, to take for
the use of the United States any of the steamers of said line, and
in such case pay a reasonable compensation therefor,
provided the price paid shall in no case exceed the
original cost of the vessel so taken; and the provision shall
extend to and be applicable to the steamers of the Brazilian line
hereinafter provided for. "
Page 103 U. S. 723
"SEC. 6. That if the contract for the increase of the mail
service between San Francisco and China and Japan to a semi-monthly
service shall be made with the Pacific Mail Steamship Company, or
shall be performed in said company's ships or the ships of its
successors in interest, the moneys payable under such contract
shall be paid while the said company or its successors in interest
shall maintain and run the line of steamships for the
transportation of freight and passengers, at present run between
New York and San Francisco, via the Isthmus of Panama, by the said
Pacific Mail Steamship Company, and no longer,
provided
that said requirements shall in all respects apply to any party
contracting for the mail service between San Francisco and China
and Japan, as well as to the Pacific Mail Steamship Company."
After advertising for bids for this service, and receiving one
from the Pacific Mail Company, the Postmaster General and the
company signed, Aug. 23, 1873, a contract which is too long to be
copied here in full. On the part of the company, after reciting the
times of departure and places of delivery of the mails which they
bound themselves to carry for the period of ten years, commencing
on the first day of October, 1873, there occurs this sentence, on
the construction of which the present controversy hinges:
"And the said contractors do further covenant and agree with the
United States, and do bind themselves, that the steamships
hereafter offered for the service shall be of not less than four
thousand tons register each, and shall be built of iron, and, with
their engines and machinery, shall be wholly of American
construction, of the best materials and after approved models, and
shall be so constructed as to be readily adapted to the armed naval
service of the United States in case of war, and before acceptance,
the officers by whom they are inspected shall report to the
Secretary of the Navy and the Postmaster General whether this
condition has been complied with; and further that the said
steamships, after acceptance by the Postmaster General, and during
the period they may be employed in conveying the mails, shall be
kept up by alterations, repairs, and additions, as the exigency may
require, fully equal to the best state of steamship improvement
attained; and if not so kept up and maintained, they may be
rejected by the Postmaster General of the United States as not
meeting
Page 103 U. S. 724
the requirements of the act of Congress authorizing the
additional monthly service, and other satisfactory steamships
required in their place."
The question is whether the company was bound by this contract
to carry this additional semi-monthly mail in vessels of the class
here described and in no others, or whether, while exercising due
diligence, to have as many vessels of that kind as were necessary,
in addition to those which had been accepted under the first
contract, these last could be used in performing the contract.
Counsel for the government maintain that inasmuch as under this
contract but one trip was made by a vessel of the class here
described, the service rendered by other vessels which had been
accepted by the Postmaster General, before this contract was made,
was not a service in compliance with the contract for which they
are entitled to receive the $41,666.66 per trip, while the
contention of the company is that it was at liberty to use ships
already accepted for this service, being the same service which
they were then performing under the former contract, except that it
had now become a semi-monthly instead of a monthly mail, and that
by the use of the word "hereafter," in the new contract, reference
was had to such new vessels as it might become necessary to
introduce into that service.
It will be observed that "hereafter" occurs in the act of 1872,
under which the contract was made, and in the same connection. It
has no sense either in the statute or the contract, unless there is
an implied reference to vessels already accepted. If we suppose
that while Congress required the contract to be let, after public
notice, to the lowest bidder, but at no higher rate than $500,000
per annum, it also had in mind the great probability that the
company which was performing the contract for a monthly mail at
that price would obtain the contract for the additional service, we
can readily understand the use of the word "hereafter" both in the
statute and in the contract. It being understood that six vessels
of that company had already been inspected and accepted by the
Postmaster General for that service, and were then engaged in it,
the only reasonable use of the agreement that "steamships hereafter
offered" should be of the new class, is that those already accepted
might be used under this contract
Page 103 U. S. 725
for the same service, but that such other vessels as the service
should require must be of the higher class described in the
statute.
There are many reasons to believe that while Congress observed
its uniform policy of letting such contracts to the lowest bidder,
thus inviting competition, it felt reasonably sure that in the
present case the Pacific Mail Company would get it, if let at all,
as the maximum of $500,000 per annum left an alternative that no
contract might be made.
One of these considerations is that the company had for some
time been making semi-monthly trips on the same route in pursuit of
their general business as carriers, and had carried the mail every
trip, receiving for the trip, for which they had no contract, what
is called the sea postages -- a phrase not explained in the record,
but understood to mean the postage received by the United States
for the mail matter actually carried. If the company was doing this
already for such a small sum, generally less than $1,000 per round
trip, it was to be supposed they could underbid anyone else.
Besides, it was well known that no one else was prepared to perform
the service, or could afford to put in a competing line for it.
That Congress contemplated the taking of the contract by this
company as extremely probable is shown by the provisions of the
sixth section of the act that if the contract was made with that
company or performed in its ships, the money should only be paid so
long as that company should continue its line from New York to San
Francisco by way of Panama. We have here not only the probability
that this contract would be made by the company which already was
running a line of steamers from New York to San Francisco and was
doing the work from San Francisco to Asia, which was now to be
doubled, but we have the one made to depend on the performance of
the other, and the distinct intimation that the new service might
be performed in the ships of that company. Now though this does not
necessarily mean ships then in existence, when taken in connection
with the use of the word "hereafter," as we have suggested, it adds
to the force of the implication that ships of that company which
had already been accepted might still be used for a service not
new, but increased in the
Page 103 U. S. 726
frequency of voyages, if the contract was awarded to the company
then performing the service.
The construction of this contract was referred by the Postmaster
General to the Attorney General in the summer of 1874, the question
being whether the contract had been forfeited or was liable to be
declared so by reason of the fact that while the new service was to
commence Oct. 1, 1873, no vessel of the higher class described in
the contract had been offered.
The Solicitor General, in a very careful opinion, held that
while the literal terms of the contract might be held to mean that
the additional service should be wholly performed in the higher
class of vessels, the act of Congress under which the contract was
made clearly did not require this.
He says:
"It seems to me plain that the act of 1872 did not require such
additional mail service in steamships of the new class, unless such
became necessary."
And while he is of opinion that the language of the contract
does require this, he considers it to be an immaterial part of the
agreement, and concludes that the failure to provide the new
vessels when the work was as well done by those already accepted
did not authorize a forfeiture of the contract.
The Attorney General also gave an opinion in which, while he
declines to adopt all of the Solicitor General's views, he
says:
"I am of opinion that it was not an essential part of the
contract that the new iron steamships should be furnished by the
1st of October, 1873, if at that time it satisfactorily appeared
that they would be furnished within a reasonable time
thereafter."
14 Op.Att.Gen. 674. It does not appear to us that there is such
a discrepancy between the language of the statute and of the
contract as is suggested by the Solicitor General, and if there
were, the following words found in the contract would make the
statute govern the case:
"This contract shall in all its parts be subject to, and in all
respects governed by, the requirements and provisions of the third
and sixth sections of the Act of Congress approved June 1,
1872."
These are the sections we have copied, and which the Solicitor
General construes as we do, not to require the steamships of the
new class until other vessels became necessary besides those
already accepted.
Page 103 U. S. 727
That such was the understanding of the parties to this contract
receives strong confirmation from language found in the bid or
offer of the company, which was accepted without qualification by
the Postmaster General. It is this:
"We are now building two iron propellers of about 4,500 tons
register, capable of steaming twelve knots, and propose, as soon as
practicable, with the limited facilities now available in America,
to build two more steamers of like construction, but larger and of
higher speed, all of which we shall offer for the service in
question. Until they can be put into commission, and afterwards,
whenever circumstances may require us to relieve them temporarily,
we propose to perform the service with one of the steamships
heretofore accepted for the China mail service, viz.,
America,
Japan, China, Great Republic, Alaska, and
Colorado,
or in case of need with the
Constitution, heretofore
accepted as a spare steamer for said service."
It does not appear that this was objected to, and the finding of
the Court of Claims is that the proposal was accepted as made, and
if there by any difficulty in construing the language of the
contract, it is fair to presume that it was not intended to
conflict directly with such an important part of the proposal,
after it had been accepted without objection.
Two acts of the claimant are much relied on to sustain the
construction of the contract now asserted by the government's
counsel, and it must be confessed that they tend to show that,
about the time the performance of the contract should have
commenced, some of the officers of the steamship company
entertained the view that all the additional service was to be
performed in the new class of vessels.
The first of these is a letter written in behalf of the
steamship company by S. K. Holman, vice-president, in answer to one
from the Post Office Department. This latter letter is dated Oct.
24, 1873, and is addressed to George H. Bradbury, president of the
company, and requests him to put in writing, for the use of the
department, the explanation which, in a recent personal interview
with the Postmaster General, he had given for failing to commence
the additional service on the 1st of October, as required by law
and contract.
To this Mr. Holman says:
Page 103 U. S. 728
"SIR -- In the matter of the contract between the Postmaster
General and the Pacific Mail Steamship Company for an additional
semi-monthly mail service between San Francisco, Japan, and China,
said service to be performed with American-built iron steamships of
not less than 4,000 tons register, and to have been commenced on
Oct. 1, 1873, we beg to submit the following, which will explain
the reason of our failure to have placed the ships on the line as
per contract."
He then proceeds at length to explain the difficulties
encountered in the construction of the two ships
City of
Pekin and
City of Tokyo, which had prevented the
company from placing in time any vessel of that class in the line.
It must be conceded that this language and the whole tenor of the
letter impliedly admit that it was the duty of the company under
the contract to furnish the new class of vessels at once.
This is further confirmed by the fact that while the mails were
carried twice a month from October 1 to December 31, on vessels
already accepted under the old contract, the sea postage for this
service, amounting to $1,510.81, was, on the 11th of February,
1874, paid to the company at its request.
But immediately thereafter, the company refused to receive any
more of the sea postage, though warrants therefor to the amount of
$5,105.41 were tendered, and it continued to perform the additional
service, and to demand the contract price for it, until Congress,
by the Act of March 3, 1875, c. 128, in the exercise of the power
reserved in the Act of June 1, 1872, repealed that act and annulled
the contract.
But the question to be decided is not how one or more of the
officers of the steamship company construed the contract several
months after it had been made, but what was the intention of the
parties thereto, and what did Congress mean when it enacted this
particular proviso. We have already said that by a just
construction of its terms, the contract conforms to the statute,
and that the latter did not require the additional service to be
performed exclusively in the new class of vessels. We have shown
that when bidding for the contract, the company guarded this point
by expressly stating they should use the old vessels.
Is all this to be overcome by the language of a single
officer
Page 103 U. S. 729
of the company, and that not the highest, and whose authority in
the company is not shown? There is no evidence that the president
of the company or its board of directors held these views.
So the receipt of the sea postage for three months may have been
by the mistaken action of some inferior officer of the company.
Long before the new contract was to begin, the company had been
performing this additional service and receiving the sea postage as
compensation for it, and it may have been that some officer,
unaware of the new contract, had continued to ask for and receive
these postages after it went into effect. We do not think these
acts are sufficient to overcome the construction of the contract
arising from the statute and the language of the instrument, and
they certainly do not estop the company from asserting the rights
which the true construction of it gives them.
The Court of Claims finds that the additional mail service was
performed by twelve round trips, beginning Oct. 17, 1873, and
terminating Jan. 16, 1875, and that of these voyages six were made
by ships which had been accepted under the first contract, and six
by vessels which had never been accepted by the Postmaster General.
We are of opinion that claimant can only recover on this contract
for the service rendered by vessels which had been accepted, and
that it cannot recover on the contract for mails carried in vessels
which had not been accepted under the contract. As to these, the
sea postages offered by the Postmaster General must be, as it was
before the making of the contract, the only compensation. There may
be deductions for nonperformance of duty, or other matters provided
in the contract, in regard to which no finding is made by the Court
of Claims, but which will be open to inquiry on the return of the
case to that court.
As regards the sum allowed claimant for the voyage of the
City of Pekin, we think the Court of Claims was clearly
right. That vessel had been examined and accepted by the Postmaster
General, as one of the new and higher class of vessels, and the
mails had been delivered to her at San Francisco, on the 20th of
February, 1875, and she had started on the round trip ten or twelve
days before Congress passed the statute
Page 103 U. S. 730
annulling the contract, and she carried the mails under that
contract on the voyage out and the return voyage. We are of opinion
that the repeal of the statute and the annulment of the contract
were not designed to operate on that voyage, and that in that
respect the judgment of the Court of Claims was right.
Its judgment in regard to the other trips will be reversed, and
the case remanded to it with instructions to render a judgment in
conformity to this opinion; and it is
So ordered.