City of San Juan v. St. John's Gas Co.

195 U.S. 510 (1904)

CITY OF SAN JUAN
v.
ST. JOHN'S GAS COMPANY, LIMITED.

No. 41.

Supreme Court of United States.

Argued November 3, 1904. Decided December 12, 1904. ERROR TO THE DISTRICT COURT OF THE UNITED STATES FOR THE DISTRICT OF PORTO RICO.

Submitted by Mr. N.B.K. Pettingill for plaintiff in error.

Mr. Frederic D. McKenney, with whom Mr. Francis H. Dexter and Mr. John Spalding Flannery were on the brief, for defendant in error.

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 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 Mullenhoff & 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.

Excluding irrelevant details, it appears as follows:

Some time 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 $3 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 $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 expressed 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 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 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 Nap. 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 at that 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 is 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, 253, 263; Very v. Levy, 13 How. 345, 357; Bull v. Bull, 43 Connecticut, 455; Neal v. Handley, 116 Illinois, 418; Dimmick v. Sexton, 125 Pa. St. 334.

True also it is 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.

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. 353, 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 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.