1. To ascertain the intent of the parties is the fundamental
rule in the construction of agreements. When the substantial thing
which they have in view can be gathered from the whole instrument,
it will control mere formal provisions, which are intended only as
a means of attaining the substance.
2. The state of things and surrounding circumstances in which an
agreement is made will be looked at as a means of throwing light
upon its meaning, especially for the purpose of ascertaining what
is its true subject matter.
3. A grant of a right to draw from a canal so much water as will
pass through an aperture of given size and given position in the
side of the canal is substantially a grant of a right to take a
certain quantity of water in bulk or weight. What that quantity is
may be ascertained from the character and depth of the canal, the
circumstances under which the water is to be drawn, and the state
of things existing at the time the grant is made.
4. The grantee will be entitled to draw this quantity even
though it may be necessary to have the aperture enlarged if it can
be done without injury to the grantor.
The Chesapeake & Ohio Canal Company was the proprietor
Page 82 U. S. 95
of a canal which, at its terminus in the Georgetown, D.C., was
much higher than the Potomac River, and so furnished by its surplus
water a considerable water power. This power the company had for
many years been in the habit of leasing out to the proprietors of
various mills built not far from the side of the canal. The general
form of lease used was that of a grant of the right, for a certain
term of years, at a certain rent, and under certain restrictions,
to draw from the canal so much water as would pass through an
aperture of specified size (stated in square inches) in an iron
plate fixed in the side of the canal. From this aperture the water
was carried in a trunk or forebay to the premises of the lessee and
discharged upon his water wheel. The rent usually charged had been
$2.50 or $3 per annum for every square inch contained in the
aperture agreed upon.
In January, 1864, one Hill proposing to build a paper mill to be
run by water from the canal, but not yet having built it, procured
from the company a lease by which they granted and agreed that he
should have full right, for the term of twenty years from the first
of July, 1864 (with privilege of renewal indefinitely) to draw off
from the Chesapeake & Ohio Canal, at Georgetown, to be used at
his property at the corner of Potomac and Water Streets (from the
level between locks No. 4 and No. 5), so much water as would pass
through an aperture of 200 square inches in an iron plate not
exceeding half an inch in thickness, to be used solely for
propelling the machinery of a paper mill and appurtenant works, but
on certain conditions,
viz., the aperture was to be of
such height and length in the clear as to make just 200 square
inches (which probably meant, as this Court assumed, that it was to
be rectangular); its lower edge not to be nearer the canal bottom
than two feet; it was to be plain and square through the plate,
with no attachment or contrivance to increase the quantity of water
to be drawn, and to have a sliding gate in front, so that the water
power granted might be totally or partially stopped, as the
provisions of the contract might require. The forebay, or trunk,
for conducting the water through the canal bank,
Page 82 U. S. 96
from the aperture, was to be covered or bridged; and said
forebay, aperture, and gate were to be so constructed as not to
interfere with the navigation of the canal or use of the tow path,
and to be of good and substantial construction, so as not to
occasion any leakage,
and to be constructed at the cost of
the lessee,
under the direction and superintendence, and
subject to the approval of, the proper officer of the company,
and, at like cost and
under like superintendence, to be altered
from time to time, as might be considered necessary by the company
or its proper officer, to prevent or lessen the inconvenience
to the navigation of the canal and use of the tow path. It was also
stipulated that the officers and servants of the company should at
all times have free access to the lessee's premises to examine and
repair the embankments of the canal, and the lessee's fixtures and
works connected with drawing off the water, for the purpose of
seeing whether the water was wasted by leakage, or whether more
water was drawn off than was granted. Hill agreed to pay for the
use of the water leased an annual rent of $500 for the first ten
years, and $600 for the last ten, and it was made a condition that
if the rent should not be paid, or if the other stipulations should
not be complied with, or if he should alter or enlarge the forebay,
or trunk, or aperture, or apply the water to other uses, without
the consent of the company, they might cut off the water until he
should make amends or satisfaction. It was also agreed that if the
water should at any time be found deficient for the uses of
navigation (which was declared to be the primary purpose of the
canal), the supply to the mill might be diminished or stopped as
might be requisite for meeting the deficiency.
Having got his lease, Hill went to work, and, at a cost of about
$40,000, erected his mill, placing it at a distance of 350 or 450
feet away from the canal -- a greater distance than were the other
mills. This required a long forebay. Such a one he built, of solid
masonry, giving to it, however, both less capacity and less pitch
than marked those of the other mills and adopting in his mill a
turbine wheel instead of the ordinary overshot. The result of the
whole was that
Page 82 U. S. 97
he received about half the quantity of water which commonly came
to the other mills, through an aperture in the canal of $200 square
inches.
In this state of things, Hill agreed with the company, in May
and June, 1866, that he should have a lease for such additional
quantity of
water power as was required for his mill, upon
the usual terms, on payment of a bonus of $5 per inch for such
additional quantity. Hereupon the engineer of the company and the
superintendent of Hill's mill went to work to ascertain by actual
experiment how much additional water was required. Their mode of
operation was to raise the slide in the side of the canal through
which the water flowed to the mill until a sufficient quantity to
propel it flowed through. The mode in which the forebay to Hill's
mill had been constructed allowed them no other mode. Accordingly,
the head of water being weak, as the gauge was lifted
upwards and the water flowed from towards the
top
of the canal, the operation brought the slide to a point only five
inches below the surface of the canal, and no sufficiency of water
could be had until an aperture of 700 inches -- an aperture,
therefore, of 500 inches more than the one originally agreed on --
was made. This aperture was accordingly left, and the water that
went through it was used by Hill.
At the next quarter day, the company required him to pay the
bonus and quarter's rent upon the additional 500 inches, which he
refused to do. They then were about to shut off the water when Hill
filed this bill in the court below for an injunction. After answer,
the court referred it to Mr. W. R. Hutton, engineer of the company,
to report as a commissioner and expert upon certain matters
concerning this and the other mills.
Mr. Hutton reported that the other mills discharged about 6 2/3
cubic feet per second for every 100 inches of aperture, while
Hill's 200 discharged at only the rate of 6 1/2, though, with
allowance for the location of the mill and other circumstances, he
ought, through his 200 inches, to have received at least 11 cubic
feet per second.
Page 82 U. S. 98
This question, also, was referred to him:
"How many square inches of aperture, situated at the distance of
two feet from the bottom of the canal, and of the width of
complainant's forebay, would furnish a flow of water equivalent in
power and effect to the additional water received by the
complainant under his new contract, over and above his original
grant?"
Mr. Hutton reported that the additional 500 inches provided for
by the contract were the equivalent of but 217 inches drawn
two
feet from the bottom, and under the conditions of the
lease.
The court accordingly made the injunction perpetual, so long as
Hill should pay rent on 217 inches.
From that decree it was that the company now appealed.
Page 82 U. S. 99
MR. JUSTICE BRADLEY delivered the opinion of the Court.
The large investment of capital made by the appellee in sole
reliance on the water power which the lease secures, with the full
knowledge which the appellants had of this reliance and intended
investment, renders it necessary that we should look carefully to
the substance of the original
Page 82 U. S. 100
agreement, of January, 1864, as contradistinguished from its
mere form, in order that we may give it a fair and just
construction and ascertain the substantial intent of the parties,
which is the fundamental rule in the construction of all
agreements. It is not to be presumed that they intended to provide
for a certain aperture in the canal without respect to the amount
of water it would discharge and the purpose which that water was to
accomplish. What the appellee sought was
water power to
drive the machinery of an expensive mill. The appellants knew this
to be his object, and the thing leased or granted was intended to
be, and in fact was,
water, as the means of creating such
power. It was not only water, but a
certain quantity of
water -- namely (in the words of the lease), "so much water as will
pass through an aperture of two hundred square inches," under
certain conditions specified. The parties clearly had in view a
fixed quantity of water to be received in a given time. In
ascertaining their mutual rights under the lease, it is important
to know how much this quantity was. When we know that, we know the
substance of the agreement.
Now in speaking of a certain quantity of water, we always have
reference to its cubical contents, its bulk or weight. We mean so
many gallons, or hogsheads, or cubic feet of water. We have no
reference to surface or sectional measurement. A square foot or a
square inch of water expresses no quantity at all. But when we
speak of the quantity which will
pass through a square
foot or square inch of aperture in a certain time, then our words
have meaning. The size and position of the aperture so carefully
prescribed in the lease were intended merely as a means of
measurement of the real thing granted -- namely that certain
quantity of water per second or per hour which the parties had in
mind and about which they were dealing. If we can ascertain this,
we can easily adjust the mutual rights of the parties. Can it be
ascertained from the terms of the lease, aided by the light derived
from the evidence in the cause? We think it can. And in making this
inquiry, we have a right to examine into the state of things
existing at the time
Page 82 U. S. 101
and the circumstances in which the lease was made. This kind of
evidence is especially pertinent when the inquiry is as to the
subject matter of the agreement.
The amount of water which will be discharged through an aperture
of a given size will depend upon the form of the aperture, the head
under which the water is drawn, and the freedom from obstruction
with which it is permitted to flow away.
In this case, the lessee is not restricted as to the form of the
aperture, except, perhaps, that it shall be rectangular. So that it
contains only the content of two hundred square inches, he is at
liberty to construct it of such relative dimensions as he sees fit.
Of course it is his interest to give it the greatest length and the
least height consistent with a free flow. Such a form gives the
greatest head of water above the aperture and increases the
discharge. The right of superintending and directing the
construction of the works, reserved to the lessors, cannot be
construed to restrict this discretion of the lessee. That right has
more particular reference to the manner of the construction and the
solidity and safety of the work in reference to the structure and
uses of the canal. It cannot be allowed to annul the substantial
rights of the lessee without becoming repugnant to the grant.
Page 82 U. S. 102
In the next place, as to the head of water under which the
leased water is to be drawn, the only restriction imposed upon the
lessee in this regard is that the lower edge of the aperture shall
not be nearer to the canal bottom than two feet. Of course he is
entitled to draw under the entire head of water above this two
feet. What that head shall be will depend upon the usual depth or
height of water in the canal. It is to be presumed that the parties
contracted in reference to that. The lessors do not guarantee any
particular head, but any alteration of their canal which would
materially and permanently reduce it would abstract from the lessee
a portion of the water, which he must be presumed to have
stipulated for. The contract was made in reference to the state of
things existing at the time it was made.
In the third place, as to the freedom from obstruction with
which the water shall be permitted to flow off and be discharged:
the lease imposes no restrictions upon the lessee on this point
except that he shall not affix to the aperture any attachments or
contrivances for increasing the flow beyond what it would otherwise
be. This restriction relates to the well known law of practical
hydraulics that an adjutage or nozzle attached to the outside of an
aperture prevents the vein of water from contracting and increases
the aggregate discharge. With this exception, however, the lessee
is entitled to draw off from the canal as much water as the two
hundred-inch aperture will discharge when it flows free from any
obstruction except that which may arise from the ordinary use of
the water in milling operations. This is a very important and
essential right of the lessee, and one of which the lessors cannot
deprive him under any pretense of regulating and directing the mode
of constructing his forebay and its appendages. If the water is
discharged under a four-feet head (which is about what the evidence
shows to be the fact), the practical rules of hydraulics determine
exactly how much water will issue in each second of time from a
rectangular aperture of two hundred square inches, provided it
meets with no obstruction outside, as where it falls out freely
into open space. Mr. Hutton, the commissioner, to whom, as an
expert, certain important questions in the cause were referred by
the court below, says that the other mills discharge about six and
two thirds cubic feet per second for every one hundred inches of
aperture. This is probably a little less than the discharge would
be in the open air, because there is undoubtedly some obstruction
to the flow arising from the passage of the water through the
flumes.
This rate of flow would give to the appellee, through his
aperture of two hundred square inches, a discharge of thirteen and
one third cubic feet per second. Something like this amount of
actual water must be considered as within the intent of the parties
to give and receive.
But the fact became developed that, by the faulty
construction
Page 82 U. S. 103
of the appellee's forebay or flume arising from its small
capacity, its great length, and its want of pitch or slope, he does
not get but about one-half of the amount of water which is due to
the aperture in the canal and which he ought to receive. This fact
is established beyond a question by the evidence.
Now certainly it is not equitable, even if it be in accordance
with the strict letter of the lease, that the appellee should be
compelled to pay full rent for half the quantity of water which,
according to the real intent of the parties, he stipulated for.
True, it may be said that it was his own fault to construct the
forebay in the disadvantageous manner which he has done, and that
if he wants the full benefit of his lease, he should tear it down
and reconstruct it differently. This would require a great
sacrifice on his part, and would not benefit the appellants. Surely
a court of equity cannot be compelled to consign a party to such a
clumsy and ruinous remedy as this. The appellants can sustain no
injury by allowing the lessee to take so much water as he supposed
he was getting and as they supposed they were granting. This would
be in accordance with the substance of the agreement. It would
carry out the intent of the parties as gathered from the whole
instrument and the state of affairs existing at the time it was
made, and would save the lessee from a ruinous expenditure for
alterations rendered necessary by his mistake.
It may be said that the location of the appellee's mill at a
distance of 350 or 400 feet from the canal was a circumstance which
the lessors had a right to take into account, and that by having to
conduct the water such a long distance, it could not be supposed
that the lessee would be able to draw as much water through a given
aperture as if his mill had been located nearer. This is true, and
whatever is due to that circumstance the appellants are entitled to
insist upon. But Mr. Hutton, the commissioner, says in his report
that, making all allowance for the particular circumstances and
location of the appellee's mill, he still ought to receive at least
eleven cubic feet per second through the aperture named in
Page 82 U. S. 104
the lease, whereas in fact he receives only twenty three cubic
feet through an aperture of seven hundred inches, or at the rate of
only about six and a half cubic feet per second for an aperture of
two hundred inches.
But if the appellee should receive eleven cubic feet of water
per second, to which his lease may justly entitle him, this is not
sufficient to drive his mill, and the question then arises as to
the additional quantity which he requires, and which, according to
the witnesses, is about twelve cubic feet per second. It appears
from the case that the appellants agreed to furnish him the
additional amount required for his mill on the usual terms, and
that the appellee accepted the offer, but in consequence of the
controversy which arose about the measurement of the water and his
refusal to comply with their demands, they declined to carry out
the agreement. Had the appellants been right in the position they
assumed, they would have been justified in making this refusal. But
we think that they were not right, and therefore that they are
bound to carry the agreement into effect, and that the appellee is
entitled to receive the additional amount required at the same rate
and on the same terms at which he was to have the original two
hundred square inches. And as eleven cubic feet of water per second
are due to the original aperture named, the additional twelve cubic
feet per second would require, according to the report of the
commissioner, a corresponding aperture of two hundred and seventeen
square inches. For this additional amount of aperture the appellee
should be charged, making the total amount four hundred and
seventeen square inches. But to get the water to which it entitles
him, as his forebay and apparatus are at present constructed, he is
obliged to have, in reality, at the canal, an aperture of seven
hundred square inches. The appellants were willing that he should
have this aperture by increasing the height of the original
aperture, but insisted that he should pay for seven hundred inches,
according to the terms of the lease. Under the peculiar exigencies
of the case, obstructed as the flow now is, we think that for the
aperture named he should be charged
Page 82 U. S. 105
for only four hundred and seventeen square inches. This is
precisely the view on which the decree below is based, and we think
it is correct. But as the difficulty between the parties originated
from the mistake made by the appellee himself in the construction
of his forebay and works, he ought not to recover any costs from
the appellants, either in this Court or the court below.
The result is that the decree must be
Affirmed, but without costs in either court.
MR. JUSTICE STRONG, with whom concurred MR. JUSTICE DAVIS,
dissenting:
I dissent from the judgment given in this case. In my opinion,
it practically makes a new contract for the parties -- a contract
to which they never agreed. It holds that what, at most, was an
expectation of results amounts to a binding obligation that they
shall follow. To this I cannot agree.
