City of Portland v. Atlantic & St. Lawrence Railroad , 1882 Me. LEXIS 143 ( 1882 )

AppletoN, C. ,J.

This is an action on a contract entered into by these parties on the thirty-first of October, 1868.

The city of Portland had issued its bonds in aid of the defendant corporation to a large amount, between August 1, 1848, and the date of the contract in suit.

The contract, after stating specifically the several issues of bonds, further adds that the railroad company, as required by law, gave to the plaintiff "its several obligations, under the seal of the company and signatures of the directors, for the same several amounts, conditioned in substance that the company Would pay the interest and principal of all said bonds, as the same should become payable and mature, and would save and . hold the city harmless on-account of the issue of the same.”

A sinking fund had been provided by the acts of 1848 and 1850, under which the bonds of the city had been issued, to meet its liabilities as they should mature; but was found insufficient. After deducting the sinking fund, there was due from the defendant corporation, the sum of seven hundred and eighty-seven thousand dollars. The plaintiff had the right to demand the immediate reimbursement from the defendants of the sum advanced, and to enforce its payment by foreclosing their mortgages and by suits on the defendant’s bonds.

Such being the condition of the railroad company, it represented to the city its inability to meet its obligations by paying the principal of the city bonds at maturity, beyond the amount of the sinking fund, and " requested the city to grant to it and its assigns, an extension of the company’s several obligations, and an extension of the mortgages given for the security of the same for all the amount of the bond, which the city will be obliged to pay.”

In pursuance of the united action of the city and the railroad company, the act of March, 1868, was passed, under the authority of which this contract was entered into, by which "subject to all the limitations, conditions and restrictions of said act, the city hereby agrees, that it wiE'grant an extension of the balances aforesaid of the company’s obligations hereinbefore mentioned, and an extension of the mortgages given for security of performance thereof; which extension shall be for the term of eighteen years from the first of January, 1870, for all the balances of the obligations so given by the company to the city under the act of 3 848, and for the term of eighteen years from the first of February, 1871, for all .the balances of the obligations so given under the act of 1850.”

The balances referred to in the contract were the bonds of the preceding issues which were then remaining unpaid, and which the company acknowledge they were unable to pay. New bonds corresponding to the "balances,’’that is, the unpaid bonds of the city, were issued. The act of 1868, was passed to enable the city to relieve the company by their issue. But it will be perceived no security of the city was to be relinquished. The time of payment of the indebtedness of the company and of the enforcement of the securities for their indebtedness, were extended; but nothing was discharged. But the securities given for the company’s inbebtedness, are equally available to protect the indebtedness when extended, that is, the new bonds when given as the original bonds. Nothing but payment will discharge a mortgage. The renewal of a note, secured by a mortgage is not such a payment as will discharge the mortgage unless the parties so intended it. Ellsworth v. Mitchell, 31 Maine, 247; Watkins v. Hill, 8 Pick. 522; Pomroy v. Rice, 16 Pick. 22.

The new bonds given in renewal of those the company were unable to pay, are protected by the several obligations of the company specified in the contract, by which it is agreed "that the company would pay the principal and interest of said bonds, as the same should become payable and mature, and save the city harmless from the issue of the same.”

The city, in pursuance of the act of 1868, issued at the instance and for the benefit of the company, its bonds payable at six per cent in eighteen years. The present rate of interest is three or four per cent. The company has on January 4, 1881, tendered the city "the full amount of said unsatisfied balances and of said unsatisfied indebtedness, to wit, the sum §787,000, the principal of said unsatisfied balances and unsatisfied indebtedness, and also the sum of §8,132.33, for the interest to that day upon said prin- . cipal, in full discharge of such unsatisfied balance and indebtedness,” which the city has refused to accept. If the tender is available to the company in discharge of its obligations, then the city must be a loser by the difference between the interest it must pay and the interest it can obtain. It must provide for the investment of the funds to meet its maturing bonds and run the risk of its investments; a loss to be borne necessarily while the present rate of interest continues ; a burden which no contract imposes upon it. It is obvious, if the position assumed by the' learned counsel for the company be correct, the city will not be saved harmless as the company have agreed to do.

A creditor cannot enforce the payment of a debt before its maturity. A debtor cannot compel his creditor to receive his debt before it is due. The rights of the parties are equal and reciprocal. The city, if it wished, cannot compel the present payment of its outstanding liabilities for the company, nor can the company compel the city to receive at a loss what is neither due nor collectible.

The contract of these parties is made by its terms subject to certain "arrangements, conditions and stipulations.”

By the first "the railroad company engages that, . . it will continue to provide for and pay the interest which shall accrue and be payable on all the now outstanding bonds of the city, issued under the acts of 1848 and 1850, until the maturity of the principal of the same,” &c. "and in case of default, . . the city is to be at liberty tb terminate the extension hereby granted, and may resort to all the legal remedies for such default, provided and existing under the acts of 1848 and 1850.”

The provision to pay the accruing interest on outstanding bonds until their maturity, negatives any promise to pay the principal until such maturity. The city could not compel and were not bound to receive the .payment of the principal. As new bonds were to be issued in extension of those which had been issued, and as the old bonds would be withdrawn by such issue, it cannot be doubted that these stipulations were, and were intended to be equally applicable to the new bonds as to those which they displaced. The company is to continue to pay the accruing interest, but the only interest which will accrue, is upon the bonds given under the extension which the city granted.

By the second stipulation "the company further engages, that it will semi-annually, provide for and pay to the city, or deposit to the use of the city, at such place as the treasurer shall appoint, the accruing interest upon all the unsatisfied balances of the company’s obligations given to the city as aforesaid, so long as any balances shall remain undischarged, and that it will make and pay all the contributions required by the act of March 3, 1868, to be made to the new sinking fund established by that act,” &c.

But "all the unsatisfied balances of the company’s obligations given to the city ” are represented by the bonds of the city whether old or new, "which shall remain undischarged.” The payments are to be semi-annual and of the interest semi-annually accruing. There is no stipulation that more shall be paid to or received by the city.

The fourth stipulation recognizes the issue of new bonds "to an amount equal to the unsatisfied balances of the company’s obligations,” and provides for the issue of new bonds, and provides that "the company shall pay to the city all the cost of preparing and issuing such new bonds and of negotiating the same, and will make up to the city any loss that may be sustained by discount in negotiating the same.”

By the fifth stipulation, the parties "further agree, that their intention is, to provide for the ultimate performance and payment of all the balances of the company’s obligations aforesaid, in the manner which shall be . least burdensome and most advantageous to the parties, but without pecuniary loss or detriment to the city, in any event, and without diminishing or impairing any security held by the city,” &c.

The provision is for the ultimate, not the immediate payment of the balances of the company’s obligations. But that payment is to be made "without pecuniary loss or detriment to the city, in any event.” If the tender is a valid one and discharges the company’s obligations, a loss is inevitable. The city cannot loan the funds tendered at a rate corresponding to the rate it has contracted to pay. But the contract provides against all loss, in any event. Hence the ground taken by the company is in direct opposition to the express language of its contract.

Provision is made for a new sinking fund by the act of 1868, c. 601, § 3. By the statute "the contributions to such further sinking fund shall be on each of the years 1869 and 1870, one thirty-second part of the average amount of such unsatisfied indebtedness, subsisting in those years; but afterwards, the sum of twenty-five thousand dollars annually, until the final re-im-bursement and discharge of such indebtedness. All of such contributions shall be made by the railroad company in equal half yearly installments, on the first days of January and July in each year.”

The statute determines precisely what shall constitute the sinking fund — how and by what payments it shall be created. Nothing but as provided by the statute, is a part of the sinking fund. The company are not authorized to contribute other sums to the fund. . The sinking fund is obtained but in one way, in accordance with the statute. If sums other than prescribed by the statute, are paid to the fund for any purpose, they constitute no part of the statutory sinking fund.

By § 6 of chapter 601, "whenever the amount of the sinking-fund hereby authorized . . shall be equal to the unsatisfied indebtedness aforesaid, the commissioners shall make over and deliver the same to the city, in full discharge of such indebtedness.”

The company seek a discharge of their liability by a tender of the sinking fund But the statutory sinking fund created by § 3 was by the testimony of one of its commissioners, in round numbers, three hundred and fifty thousand dollars. The balance, four hundred and thirty thousand dollars, was no part of the sinking fund prescribed by the statute, § 6, and contemplated by the parties. The company had no authority to borrow and thus increase the fund. The city could not compel the company to enlarge the fund to the amount of its unsatisfied indebtedness. Neither can the company by funds obtained other than in accordance with the statute, compel the city to receive and discharge its claims against the company before their maturity.

The defence is not made out. The tender is not good. The city was to be fully indemnified "in any event.” The defence is adverse to the spirit of the contract, which is equitable, and makes provision for the full and complete protection of' the city. It is against the plain and natural meaning of the language used, which negatives the construction attempted to be put upon it.

Judgment for plaintiff.

Barrows, DaNPORtii and Peters, JJ., concurred. VirgiN and SyhoNds, JJ., did not sit, being interested.