Under both the common and the civil law, in the absence of a
stipulation to the contrary, the character of the money current at
the time fixed for performance of, and not at the time of making, a
contract is the medium in which payment may be made.
Where there has been a
bona fide dispute as to the
medium of payment under a contract and an agreement is finally
reached that a payment in one medium shall extinguish a larger
amount in another medium, the payment is a complete accord and
satisfaction and the rule that a less
Page 195 U. S. 511
sum, although accepted in full satisfaction of a larger
liquidated amount, is not binding as to the excess for want of
consideration is inapplicable.
The gas company, defendant in error, an English corporation,
sued the City of San Juan, the plaintiff in error, to recover
$14,600.60, alleged to be due for services in lighting 485 street
lamps from November, 1899, to September 16, 1900. Annexed to the
petition was an account showing the items from which the balance
resulted. The city generally denied, and pleaded that, under the
contract for lighting, it had at various times imposed fines upon
the company for neglect of its contract duty, which fines were a
set-off, and extinguished the sum sued for. A statement of account
was also filed by the city, showing the alleged set-off. Both the
accounts credited the gas company for lighting with $15,125.70. In
the account of the gas company, that company credited itself with
several small items for labor and materials supplied to, and
materials appropriated by, the city, aggregating $246.42, and for
interest calculated at twelve percent up to September 16, 1901, the
items in question and the interest amounting to $2,215.96, making
the total credited to the company $17,588.08. These sums were not
in the account of the city. Whilst the credit items in both
accounts therefore agreed except as above stated, there was this
further difference: the account of the gas company stated that the
sums to its credit were payable in gold or United States money;
whilst the account of the city stated such items as payable in
Porto Rican currency, declared to be worth forty percent less than
United States gold or currency. The gas company debited itself with
various payments made to it by the city on account of the services
rendered and for the sum of a certain ground rent, all amounting to
$2,987.42, leaving in its favor the balance sued for. The city's
account, whilst debiting the company with payments in United States
gold to the amount stated in the gas company's account, treated the
debt as being due in Porto Rican currency, and figured the payments
in gold as extinguishing a larger amount by forty percent than the
face value
Page 195 U. S. 512
of the gold. In addition, the gas company was debited with
certain fines imposed and other charges, and was moreover debited
in Porto Rican money with two sums aggregating $8,836.88,
amounting, if paid in gold, to $5,332.13. These two debits, it was
recited in the account, were the sums in Porto Rican money or its
equivalent in gold, which the city was bound to pay to the firm of
Mullenhoff & Korber, to which firm the gas company, with the
consent of the city, had transferred a portion of its claims
against the city in Porto Rican money, to be paid in its equivalent
in gold. By the result of the debits against the gas company, the
items credited to it were extinguished, and the account balanced.
Thus, the substantial difference between the two accounts arose
from the fact that one stated the debt to be payable in gold or
United States money, the other treated it as payable in Porto Rican
currency.
Subsequently, the city pleaded that it had paid to Mullenhoff
& Korber the sum of $5,196.80 in United States gold, and was
entitled to due credit therefor, and it was thereafter agreed
between counsel that this amount had been paid under the transfer
in question. As will hereafter appear, $4,337.32 of the sum was
paid as the equivalent of $7,228.20 in Porto Rican currency, the
amount due for street lighting up to June 1, 1900, if estimated in
Porto Rico, while the balance of $859.48 was paid as satisfying the
charge made for street lighting in the month of June, 1900, also
consisting of a larger sum in Porto Rican money.
At the trial, the undisputed proof showed that, in 1875, the
city made a contract, to last for twenty-five years, with one
Steinacher for the lighting of the city, which contract, about
1878, was assigned to the gas company; that, shortly after, there
was a difference between the parties as to whether the sums due
under the contract were payable in Porto Rican money or in current
foreign money. As a result, all the payments up to and exclusive of
the items embraced in the suit were received by the gas company,
under protest, in Porto Rican currency. So far as any payments made
on account of the
Page 195 U. S. 513
items embraced in the suit and stated in both accounts, it was
undisputedly shown that they were made in United States gold. There
was proof tending to show that the city, in making them, insisted
that the gold should extinguish its equivalent amount in Porto
Rican currency, whilst the company claimed that the payments should
only extinguish a sum equal to the face value of the United States
gold.
Concerning the transfer to the firm of Mullenhoff & Korber,
and the payment made by the city to that firm, it was indisputably
shown as follows: that the gas company, being in want of funds, had
agreed to transfer to the firm a given portion of its claim, and
applied to the city to recognize the assignment, and to pay to the
transferees the sum assigned, and that action was taken on this
request by the city, and was accepted in writing by Scott,
representing gas company, as follows:
"I, Ramon Negron Flores, Secretary of the City Council of the
City of San Juan, hereby certify, that at the meeting held by the
City Council of San Juan, on the eighteenth day of this month, the
following resolution was passed:"
"20. -- The President of the City Council declared that Mr.
Scott, the contractor of the public lighting for the city, and Mr.
Korber, a member of the firm of Mullenhoff and Korber of this city,
had called on his office and stated that the amount of seven
thousand two hundred and twenty-eight pesos and eighty-seven cents,
Porto Rican currency, total amount of the credit due to Mr. Scott,
on account of his services as contractor from November of the year
one thousand eight hundred ninety-nine, to last May, being deducted
the amounts already collected by the said contractor, should be
delivered to the above said firm, to the credit of which Mr. Scott
wishes this amount to be passed."
"The City Council agreed with the declarations of the president,
and passed the resolution considering the said balance of seven
thousand two hundred and twenty-eight pesos with eighty cents
equivalent of four thousand three hundred and
Page 195 U. S. 514
thirty-seven dollars and thirty-two cents in favor of the firm
Mullenhoff & Korber, being therefore the municipal corporation
relieved from any compromise with Mr. Scott concerning the said
amount, without any prejudice to the resolutions to be passed some
time in the future, about the claims previously filed by the said
contractor."
"And to begin the respective proceedings, I write and sign this
declaration in San Juan of Puerto Rico this twenty-second day of
June of the year one thousand nine hundred."
"(Signed) R. Negron"
"On twenty-second June, being present Mr. Scott and Mr. Korber,
the latter acting as representative of the firm, of which he is a
partner, I notified them the above resolution, and they affixed
their signature as a proof of their acquiescence to the same,
declaring at the same time, that the amount of the account of the
month of June of this year should be recognized as due to the same
firm, to which the said amount must be paid. I certify it."
"(Signed) R. Negron"
"(Signed) Mullenhoff & Korber"
"(Signed) (Signed) L. A. Scott"
"San Juan, June 19th, 1900"
"Let it be done. The Mayor, Egozcue."
There was testimony, admitted without objection, tending to show
that, at the time the city accepted this transfer, it was
understood that the reservation made in the written agreement
related only to fines which it was contended the city had unjustly
imposed on the company. The court rejected the offer of the city to
prove that the parties, by their conduct prior to the period
covered by the items sued for, had interpreted the contract as
meaning that the payments were to be made in Porto Rican money, and
not otherwise. The court also refused to instruct at the request of
the city that the contract was payable in Porto Rican money, and
charged that
Page 195 U. S. 515
it provided for payment in foreign money, exclusive of Spanish
gold, which was current in the island at the time the contract was
made. The court further instructed that the payments made by the
City of Mullenhoff & Korber in gold should be debited to the
city at the face value of those payments, unless the jury found
that the minds of the parties had met on a new contract to
substitute Porto Rican currency for the foreign current money
stipulated by the contract. The court, moreover, refused the
request of the city to charge that, if at the time of the transfer
to Mullenhoff & Korber, there was a compromise entered into
between the parties by which the payment to the firm of a given
amount in United States currency should extinguish a larger amount
of the debt due the company in Porto Rican money, that the parties
were bound thereby, as to such payment. Besides, the jury were
instructed that, as there was no proof concerning the fines imposed
by the city upon the company, as stated in the account of the city,
such items must be disregarded, and that interest, as calculated in
the account of the city, not being exigible under the local law,
must also be disregarded.
There was a verdict and judgment thereon against the city for
$8,761.35, and this writ of error was prosecuted.
MR. JUSTICE WHITE, after making the foregoing statement,
delivered the opinion of the Court.
In order to come to the principal controversy covered by the
assignments of error, we dispose of certain contentions which we
deem of minor importance. We think the court was right in
instructing the jury that it must disregard the
Page 195 U. S. 516
items as to fines charged by the city against the gas company,
because no proof was offered on the subject. Whilst it is true, as
asserted in the argument, that some reference was made to such
fines in the testimony of one or more of the witnesses, such
reference in no sense tended to establish that the fines had been
legally imposed. As to the assignment of error relating to the
refusal of the court to allow testimony for the purpose of showing
that, even if, under the contract, payment in foreign current money
was required, the contract was tacitly modified, we deem it
unnecessary to express an opinion, for the following reasons: the
record shows that, subsequent to the ruling complained of, without
objection, testimony was admitted establishing that, although all
the payments made up to the first of the items embraced in the
claim in suit, were made by the city to the gas company in Porto
Rican money, nevertheless that such payments were only received by
the gas company under protest, asserting its right to be paid in
foreign current money. However conclusive on the gas company may
have been the receipt by it of payment in a different medium from
that which it asserted the contract required, the fact of the
protest operated to prevent the inference that the medium actually
received was admitted to be the one in which future payments should
be made.
With the questions just referred to out of the way, it is
apparent from the statement which we have made of the case that the
record requires us to decide only two questions: first, in what
money were the sums due under the contract payable? and, second,
the effect of the agreement concerning payment made by the city to
Mullenhorf & Korber.
1st.
In what currency were the sums due under the contract
payable?
The contract, of which only a translation is in the record, was
passed before a notary, and is voluminous, containing in minute
detail a recital of all the occurrences which took place from the
date of the first steps taken to make a contract, and its
consummation.
Page 195 U. S. 517
Excluding irrelevant details, it appears as follows:
Sometime in 1874, the city advertised for bids for a contract
for lighting. Proposals were received from a Mr. Steinacher and Mr.
Olney. Steinacher, whilst proposing to bind himself to light lamps
for three dollars monthly for each lamp, suggested that the city
modify its request for proposals in several particulars, one of
which was that there should be included in the contract the
purchase by the contractor of gas works then owned by the city.
This suggestion was accepted, and preparatory to making a call for
bids, after obtaining the authority of the provincial deputation of
Porto Rico, the city directed that the gas works be appraised by
certain city officials. This appraisement was made as follows:
Recapitulation: Pesetas
Value of the buildings . . . . . . . . . . . . 19,176.25
Fixed and loose materials in the gas works . . 48,908.85
Fixed materials in the city. . . . . . . . . . 10,624.00
---------
Total amount . . . . . . . . . . . . . . . . 78,709.10
"The present appraisement amounting to 78,709.10 pesetas, or
$31,741.82 of the currency in commerce."
"Porto Rico,
26th of May, 1875"
"The municipal architect."
"(Signed) Domingo Sesmero"
The city thereupon called for new proposals. Among the many
conditions exacted were, first, that the bidder should agree to
light street lamps at three dollars monthly for each lamp, and that
payment for the same
"will be made in the circulating foreign money in commerce for
the value that it is received without any premium that will
equalize it to the Spanish official current money,"
that he should buy the gas works, appraised, as we have above
stated at $78,709.10, Porto Rico money at its equivalent in foreign
currency -- $31,741.82; that the bidder should furnish a guarantee
of $6,000 in cash or a bond for
Page 195 U. S. 518
$9,000, to be secured by first mortgage on a house in the city,
satisfactory to the municipality. Many details were provided in the
conditions as to the manner in which the contractor should perform
his duties, as to fines to be imposed by the city for neglect in
the quality and character of the light furnished, and for various
other delinquencies, and it was also provided "the penalties for
faults in the service and supply of gas to the public will be
imposed by the alcalde without appeal."
Steinacher was the only bidder in answer to this call for
proposals. He offered "to take charge of the city service for the
amount of $3 currency for each lamp," and to buy the buildings and
apparatus, etc., for the sum of $22,000 in currency, instead of
$31,741.82, as required by the requests for bids made by the city.
In his proposition, moreover, Steinacher tendered two houses,
stating the fact to be that one of them was encumbered by a prior
mortgage in favor of the municipality, which he, Steinacher, had
given to guarantee a prior contract existing between himself and
the municipality. In addition, his bid suggested various
modifications in the administrative provisions enumerated by the
city in its conditions. The bid, not being in accord with the
proposition submitted by the city, was rejected. Negotiations then
ensued, the result of which was that the city yielded as to the
administrative provisions, and Steinacher yielded as to the price
to be paid for the gas works, it being recited in the proceedings
of the city on the subject that, in order to terminate the
difficulties,
"Mr. Steinacher expresses himself disposed to the acquisition of
the said buildings, etc., as published in the Official Gazette of
the 8th of June last, for the amount of thirty-one thousand seven
hundred and forty-one dollars 82 cents in currency, and to take
under his charge the public light at three dollars monthly for each
lamp at same currency, according to the price published."
The houses tendered to secure the bond were accepted by the
city, and, in order to give the city a first mortgage, a
liquidation was had between Steinacher
Page 195 U. S. 519
and the city under the prior contract, and by this liquidation
it was established that Steinacher owed the city $203 in "foreign
currency," which he paid. To ascertain whether the value of the
houses was equal to the requirements of the city, they were
appraised by the city officials in Porto Rican money, and this sum
was reduced to foreign currency, and, as the amount in foreign
currency equaled the $9,000 required by the conditions of the city,
the houses were accepted and a new mortgage for that amount was
given. Under these proposals and acceptance, the contract was
executed, conforming in all respects to the proposals and bids as
modified by the proceedings which we have narrated.
The contention that the $3 per month for lighting street lamps
was payable in Porto Rican money is based on the fact that
sometimes in the contract the sum to be paid is referred to as in
currency, without any qualification. The arguments would have
cogency if the passages in the contract relied upon stood alone,
but its unsoundness becomes apparent by a consideration of the
context of the contract. The estimate of the property to be sold in
Porto Rican money and its liquidation in foreign currency; the
terms of the bid; the proposition of Steinacher, which was
accepted, to pay for the gas works at the sum of the foreign
current money to which the Porto Rican money was reduced, and to do
the lighting at $3 per lamp
in the same currency, the
action of the city concerning the liquidation of the prior account,
and the mortgage upon the house -- all demonstrate that both the
proposals of the city, the acceptance by Steinacher, and the
contract fixed current foreign money, exclusive of Spanish gold, as
the medium in which the service for lighting the street lamps was
to be paid. The court therefore was right in its instruction as to
the medium of payment required by the contract. We find, however,
nothing in the contract to support the construction that it
required the payment to be made in foreign current money
circulating in the island at the time the contract was made,
instead of money of that character circulating at the time
Page 195 U. S. 520
the payments were to be made. The general rule, under both the
common and the civil law, is that, in the absence of a stipulation
to the contrary, the character of money which is current at the
time fixed for performance of a contract is the medium in which
payments may be made.
Butler v.
Horwitz, 7 Wall. 258;
Willard v.
Tayloe, 8 Wall. 557;
Trebilcock
v. Wilson, 12 Wall. 687; Commercial Code of Porto
Rico, Art. 312; Spanish Civil Code of Porto Rico, Arts. 1091, 1157,
1170; Code Napoleon, Art. 1246; Aubrey & Rau, vol. 4, p. 158;
Mourlon, vol. 2, p. 749.
There was therefore error in instructing that the time of making
the contract was to be alone considered in determining the foreign
current money for which the contract provided. We think, however,
such error was in no sense prejudicial. This follows because it was
conceded that, if foreign current money was required by the
contract, money of the United States current at the time the
contract was made was within the contemplation of the parties, and
that such money was also current in the island at the time when
performance was due. From this it results that the rights of the
parties were in no way affected by the erroneous ruling.
2d.
The effect of the agreement concerning the payment made
by the city to Mullenhoff & Korber.
On the face of the written agreement between the city and the
gas company, it undoubtedly appears that a stated sum of money, to
be paid in United States currency, was to extinguish a larger sum
in Porto Rican money.
As we have seen, there was testimony tending to show, and none
tending otherwise, that the reservation in the written document
concerning "claims previously filed by the said contractor," and
which were to be "passed some time in the future," solely related
to claims for fines which the city had assessed against the gas
company, and the justice of which the company disputed. The city
asked the court to instruct that, if it was found that at the time
of the agreement it was stipulated by way of compromise that the
larger sum owing
Page 195 U. S. 521
at the time should be extinguished by the payment of the lesser
amount, the parties were bound. This request was refused and
excepted to. The court, in its general charge, in the fullest
manner instructed the jury that, as the medium of payment required
by the contract was foreign current money, payment in that money
extinguished simply the amount paid in foreign money, unless it was
found that the minds of the parties had met on an agreement
engendering an entirely new contract, substituting Porto Rican
money for foreign currency.
It is urged by the city that error to its prejudice resulted
from refusing to give the requested instruction. To sustain this
proposition, the doctrine is invoked that, where one receives in
payment a different thing or medium from that called for in the
contract, such receipt is binding. Undoubtedly the general rule
obtains, and is based on the premise that the discharge of a
contract in a different thing from that for which the contract
provides necessarily is an accord and satisfaction as to the
particular payment concerning which the different thing is
received.
Sheehy v.
Mandeville, 6 Cranch 263;
Very
v. Levy, 13 How. 357;
Bull v. Bull, 43
Conn. 455;
Neal v. Handley, 116 Ill. 418;
Dimmick v.
Sexton, 125 Pa. 334.
True also is it that it has been settled by this Court,
Savage v. United States, 92 U. S. 382, that
this doctrine is applicable to the receipt under protest, in
discharge of a particular payment, of a different money medium from
that which was required by the contract. Whilst we have not been
referred to any Spanish authority showing that these principles
obtained under the law in force in Porto Rico, as the doctrine
rests upon principles known to the Roman law (L. 17, C. De Solut.)
enforced under the Code Napoleon (Journal de Palais Repertoire v.
10, verbo paiement, p. 10, No. 117; Toulier, t. 12, p. 355;
Duranton, t. 12, Nos. 79 and 80), we cannot hesitate to conclude
that the doctrine in question prevailed also in the Spanish civil
law in force in Porto Rico. Whether it is applicable to the facts
of this case is, then, the question.
Page 195 U. S. 522
Now whilst it may be at once conceded that the doctrine in
question is applicable to the payments made in Porto Rican money
before the date of the first item sued for, it is equally clear
that it cannot be applied to the payments thereafter made,
including those to Mullenhoff & Korber, since they were made in
United States currency. The contention that these payments in such
money extinguished a larger sum than the par value of the money
paid reduces itself to this: that a larger sum was satisfied by the
payment of a lesser sum because there was an agreement to that
effect. The gas company in effect insists that this cannot be
sustained, because of the well established rule
"that, where a liquidated sum is due, the payment of a less sum
in satisfaction thereof, though accepted as satisfaction, is not
binding as such, for want of consideration."
Chicago, M. & St.P. R. Co. v. Clark, 178
U. S. 364, and authorities there cited.
Conceding, without so deciding, that such rule was controlling
in Porto Rico, we think it is not applicable to the case in hand.
As pointed out by this Court in the case just previously cited, the
rule in question is subject, among others, to the well established
exception that it does not apply where, at the time of the
agreement, there was a dispute between the parties the subject
matter of which dispute is embraced in the agreement to extinguish
a greater by a less amount. True it is, as pointed out in
Fire
Insurance Association v. Wickham, 141 U.
S. 564, it must appear that the alleged dispute really
existed, and did not arise merely from an arbitrary denial by one
party of an obligation which was obviously due. Despite the
construction which we have given the contract, we think it is quite
clear that the proof established that there was a
bona
fide dispute in this case. As we have seen, from the very
inception of the contract, the parties differed as to the medium of
payment -- the one, the city, insisting that it was Porto Rican
money; the other, the gas company, that it was foreign current
money. During a period of fully twenty years this controversy
continued, and in every instance the gas
Page 195 U. S. 523
company, although protesting, accepted the city's view of the
contract, and, by taking a different medium, bound itself as to
those payments despite its protest. When the period arrived when
the company was no longer willing to so act, and stood upon its
rights as it understood them, naturally the city stood upon its
asserted rights, and thus the parties were at arm's length,
disputing their respective rights. If there had been no agreement,
the solution would have required judicial action. When, in view of
this dispute, an agreement was reached that the payment should be
made in United States currency, and that the payment should
extinguish a larger amount estimated in Porto Rican currency, there
was necessarily a compromise and settlement as to that payment
which put the transaction so settled exactly in the position which
had resulted from the action of the parties concerning the payments
made during the preceding period of more than twenty years.
It follows from the foregoing that the court below erred to the
prejudice of the city in refusing the instruction asked by it as to
the result of the compromise, and that this error was not cured by
the general charge, which instructed the jury that the compromise
evidenced by the agreement must be treated as inefficacious as to
the particular items to which it related unless it was found that
the minds of the parties had met on an entirely new and independent
contract.
The judgment of the court below is reversed, and the cause is
remanded with directions to set aside the judgment, and grant a new
trial.
Reversed.
