COLUMBIA RY., GAS & ELECTRIC CO. v. STATE OF SOUTH CAROLINA(1923)
[261 U.S. 236, 237] Messrs. Wm. Elliott, and Jo-Berry S. Lyles, both of Columbia, S. C., for plaintiff in error.
Messrs. S. M. Wolfe and J. Fraser Lyon, both of Columbia, S. C., for the State of South Carolina.
Mr. Justice SUTHERLAND delivered the opinion of the Court.
This was an action brought by the state against the defendant ( plaintiff in error) to recover possession of a certain canal property, known as the Columbia Canal, on the ground that the defendant had forfeited the same by reason of its failure to fulfill certain conditions subsequent upon which its continued title depended. Prior to the year 1887 a small canal, following the course of the one now in question was owned by the state; the title being vested in the board of directors of the state penitentiary. In 1887 the Legislature passed an act incorporating the board of canal trustees, to whom the penitentiary directors were required to and did transfer the canal. 19 Stat. S. C. 1090
By section 1 of this act, the title to the canal was vested in the trustees for the use and benefit of the city of Columbia, [261 U.S. 236, 241] subject to the performance of certain obligations therein set forth, and to the proviso:
By section 3 they were authorized to construct a dam across Broad river and raise the water in the river so as to get a fall of 37 feet at the south side of Gervais street, provided that the canal be so enlarged as to carry a body of water 150 feet wide at the top, 110 feet wide at the bottom and 10 feet deep and 'develop at least 10,000 horse power at the south side of Gervais street.'
By section 5 the canal was to be opened for navigation free of charge.
By section 7 the trustees were required to complete the canal within two years so as to carry a body of water of the dimensions [261 U.S. 236, 242] stated from the source of the canal down to Gervais street and to furnish free of charge 500 horse power to the state, 500 horse power to Sullivan Fenner and 500 horse power to the city of Columbia, and 'as soon as is practicable, complete the canal down to the Congaree river, a few yards above the mouth of Rocky branch.' 2
By a subsequent act, passed in 1890, the trustees were authorized to 'sell, alienate and transfer' the property subject 'to all the duties and liabilities imposed thereby [that is, by the act of 1887], and subject to all contracts, liabilities and obligations made and entered into by said board. ...' 20 Stat. S. C. 967, 2. Under this statute the canal was sold to defendant's pr decessor, whose title the defendant now has.
The case turns upon the provision contained in section 7, requiring the trustees, as soon as practicable, to complete the canal down to the Congaree river, and depends upon whether this is a condition subsequent, the failure to perform which incurs a forfeiture, or is a covenant the breach of which gives rise to another form of remedy. [261 U.S. 236, 243] That the provision has not been complied with is not disputed.
The Legislature, in 1917, passed an act (30 Stat. S. C. 348), which begins with a preamble reciting certain of the provisions of the act of 1887, including that relating to the completion of the canal down to the Congaree river, and declaring that there had been a failure to fulfill the conditions imposed by that act. By section 1 it is then enacted that these conditions have not been complied with but have been disregarded, by reason whereof the right, title and interest 'transferred by virtue of said acts, have been forfeited and reverted to the state.' By section 2 the Attorney General, and other officers named, are directed, within 90 days, to make such re-entry for the state as might be necessary and proper under the circumstances and to take such steps as might be lawful and proper to obtain possession and control of the property and improvements placed thereon, unless satisfactory arrangements be made by the claimants of the canal. By section 3 the Attorney General is directed, at the time of re-entry or thereafter, to commence such proceedings as might be proper in any of the courts of the state to assert the right of the state to said property and improvements.
In pursuance of the act last referred to this action was brought in a state court of common pleas. The complaint alleged that the defendant had failed to complete the canal as soon as practicable down to the Congaree river, and had failed to comply with the provisions of the act of 1887 in other particulars. The other alleged violations may be dismissed from consideration, since the judgment of the trial court is based alone upon the one just specified, and its judgment is affirmed by the state Supreme Court without reference to the others.
That the legislation of 1887 and 1890, and the transactions based thereon, establish a contract between the [261 U.S. 236, 244] state and the defendant is clear. The remaining inquiries are: (1) What is the pertinent obligation of this contract? and (2) has that obligation been impaired, in violation of article 1, section 10, of the Constitution?
We are met at the threshold with a challenge on the part of the state to our jurisdiction, and this must first be considered. The judgment of the state court, it is asserted, was based upon its own construction of the contract and not at all upon the act of 1917.
As this court has repeatedly ruled, the Constitution affords no protection as against an impairment by judicial decision. New Orleans Waterworks v. Louisiana Sugar Refining Co., 125 U.S. 18, 30 , 8 S. Sup. Ct. 741; Louisiana Ry. & Nav. Co. v. New Orleans, 235 U.S. 164, 170 , 35 S. Sup. Ct. 62, and cases cited.
If, therefore, the judgment, although in effect impairing the obligation of the contract, nevertheless proceeds upon reasons apart from and without giving effect to the statute, this court is without jurisdiction to review it. Bacon v. Texas, 163 U.S. 207, 216 , 16 S. Sup. Ct. 1023, 1027 (41 L. Ed. 132) wherein the doctrine is stated as follows:
The record before us in the present case plainly discloses that the basis for bringing the action against the defendant was the act of 1917. The complaint alleges at [261 U.S. 236, 246] considerable length the provisions of the Act of 1887 and the various transactions resulting in the acquisition of the property by the defendant and its consequent assumption of the obligations contained in that statute. The provisions of the act of 1917, as heretofore recited, are then set forth, followed by a statement of certain negotiations had with the defendant, and it is then alleged that the Attorney General and the other officers mentioned, not considering it appropriate and proper to commit a breach of the peace by making forcible entry upon the property and taking possession thereof, have, therefore, by virtue of section 3 of said act instituted this action.
The sufficiency of the complaint was challenged by demurrer, upon the ground, among others, that the contract in question was impaired by the act of 1917. The demurrer having been overruled, an answer was filed, alleging such impairment and this claim was asserted and insisted upon at every stage of the proceedings to their conclusion in the state Supreme Court.
The trial court, in passing upon the demurrer, referred to the act of 1917 as authorizing a judicial proceeding and held that, coupled with a demand for possession and refusal, it was equivalent to the exercise of the right of re-entry. Upon the trial of the case that court said that the declaration in this act that there had been a failure to perform the conditions of the contract was entitled to some respect, but the court had the right to inquire into the facts and determine whether as found by the Legislature they were true. It further held that that act was binding on the court under the evidence. It is apparent that the trial court gave effect to he act of 1917, although the precise extent is not clearly disclosed. Whatever it was, it entered into and affected the judgment and this judgment was affirmed by the Supreme Court.
We accord to this ruling the respect which we must always give to the decisions of an appellate tribunal of a [261 U.S. 236, 247] state, but, as will presently appear, we have arrived at a result respecting the merits at variance with that pronounced, a result which seems to us manifestly right and forces us to conclude that the construction put upon the contract by the state courts could only have been reached by giving effect to the statute of 1917. What was said in Terre Haute, etc., Railroad Co. v. Indiana, 194 U.S. 579, 589 , 24 S. Sup. Ct. 767, 769 (48 L. Ed. 1124) is apposite and controlling:
And see Detroit United Ry. v. Michigan, 242 U.S. 238 , 246-248, 37 Sup. Ct. 87.
The jurisdiction of this court is, therefore, upheld, and we proceed to the consideration of the case on its merits; and here the crucial question is: What is the nature of the contractual obligation with which the judgment of the state court deals?
By the act of 1887 numberous obligations were imposed on the canal trustees and their assigns, among them: (a) To complete the canal within two years so as to carry a designated body of water to Gervais street; (b) furnish a measure of 1,500 horse power to the state and others; (c) keep the canal open for navigation free of charge, and (d) complete the canal as soon as practicable down to the Congaree river. No provision is made in respect of the consequences to result in case of a failure to perform any [261 U.S. 236, 248] of these obligations. The only specific provision suggesting a forfeiture is:
The effect of the acts of 1887 and 1890, and the subsequent transactions based on them, was to vest in the defendant title to the property in fee; and for this the consideration moving from the defendant was valuable and substantial. Did the failure to comply with the provision requiring completion of the canal to the Congaree river divest defendant of this title?
We begin the inquiry with the general rule before us that 'conditions subsequent, especially when relied on to work a forfeiture, must be created by express terms or clear implication, and are construed strictly' ( 2 Washburn on Real Property [6th Ed.] 942), and that 'courts always construe clauses in deeds as covenants rather than conditions, if they can reasonably do so' (Id. 938). Here there are no express terms creating, and no words such as are commonly used to introduce, a condition; nor is there any provision giving the right of re-entry upon failure to perform. It is urged by the state Supreme Court that the legislative intention must be gathered from the statute as a whole, to be read in the light of its dominant purpose which was to connect the waters of the Broad and Congaree rivers above and below shoal water, so as to promote navigation; the other purposes, though important, being subsidiary. But the purpose to accomplish this result is equally consistent with the view which regards the provision in question as a covenant, the only difference being that the remedy for a b each would be different and less drastic. In Oregon & California R. R. Co. v. United States, 238 U.S. 393 , 35 Sup. Ct. 908, this court was called upon to construe the proviso in a land grant act to the [261 U.S. 236, 249] effect that the lands granted must be sold only to actual settlers, etc., and it was held that this did not constitute a condition subsequent, but an enforceable covenant. In the course of the opinion ( 238 U.S. 419 , 35 Sup. Ct. 919 [59 L. Ed. 1360]) it was said:
And see Woodruff v. Woodruff, 44 N. J. Eq. 349, 353, 16 Atl. 4, 1 L. R. A. 380.
Moreover, the conveyance was absolute and for a valuable consideration, and a mere purpose to attain a particular end, however it may have influenced the legislation, could not have the effect of debasing the fee. See Stuart v. Easton, 170 U.S. 383 , 394-397, 18 Sup. Ct. 650, 655 (42 L. Ed. 1078) where this court said:
Not only does the statute contain no positive terms creating, or words requiring the provision in question to [261 U.S. 236, 250] be construed as, a condition subsequent, but the clear implication is to the contrary. The clause relating to the section or the cannal down to Gervais street is expressly that upon failure to complete in seven years the property shall revert to the state. In contrast, it is significant that no forfeiture is specifically prescribed with respect to the noncompletion of the Congaree section of the canal. If this requirement, nevertheless, be construed as a condition subsequent, there can be no rational ground for holding that the other obligations of the contract are not susceptible of a like construction. Among these obligations is that requiring the completion of the canal to Gervais street in two years; but the express provision for a forfeiture for failure to complete it in seven years, negatives, as a matter of logical necessity, any suggestion that a forfeiture would be incurred for a failure to complete in two years. The inference, as applied to the other obligations, including that now in question, while not so direct and obvious, is, nevertheless, one which naturally flows from the premises.
The proviso for a forfeiture in the one case is at least strongly persuasive of an intention not to impose it in other cases not so qualified. When, in addition to this, we consider all the circumstances, including the fact that the sale to the defendant was absolute and for a valuable consideration, that there are no express terms creating a condition, no clause of re-entry nor words of any sort indicating such purpose, the conclusion is unavoidable that the obligation in quest on is a covenant and not a condition subsequent. Board of Commissioners v. Young, 59 Fed. 96, 8 C. C. A. 27; opinion by Judge, afterward Justice, Lurton. We quote from page 105 of 59 Fed., from page 36 of 8 C. C. A.:
The effect of the act of 1917 is to convert that which we have held to be a covenant into a condition subsequent and to impose as a penalty for its violation the forfeiture of an extensive and valuable property. It requires no argument to demonstrate that this constitutes an impairment of the contract here involved, in violation of the Constitution. The impairment of a contract may consist in increasing its burdens as well as in diminishing its efficiency.
See, also, Boise City Co. v. Boise Artesian Hot & Cold Water Co., 230 U.S. 84, 90 , 92 S., 33 Sup. Ct. 997.
The judgment of the state Supreme Court is reversed and the cause remanded for further proceedings not inconsistent with this opinion.
[ Footnote 1 ] 'Section 1. That the of directors of the South Carolina penitentiary are hereby authorized, empowered and required to transfer, assign and release to the board of trustees of the Columbia Canal, hereinafter created and provided for the property known as the Columbia Canal, together with the lands now held therewith, acquired under the acts of the General Assembly of this state with reference thereto or otherwise, all and singular the rights, members and appurtenances thereto belonging; and upon such transfer, assignment and release all the right, title and interest of the state of South Carolina in and to the said Columbia Canal and the lands now held therewith, from its source at Bull's sluice through its whole length to the point where it empties into the Congaree river, together with all the appurtenances thereunto belonging, shall vest in the said board of trustees for the use and benefit of the city of Columbia, for the purposes hereinafter in this act mentioned, subject, nevertheless, to the performance of the conditions and limitations herein prescribed on the part of the said board of trustees and their assigns: Provided, that should the said canal not be completed to Gervais street within seven years from the passage of this act all the rights, powers and privileges guaranteed by this act shall cease, and the said property shall revert to the state.'
[ Footnote 2 ] 'Section 7. That the board of trustees shall, within two years from the ratification of this act, complete the said canal so as to carry a body of water 150 feet wide at the top, 110 feet wide at the bottom and ten feet deep, from the source of the canal down to Gervais street, and to furnish to the state, free of charge, on the line of the canal, 500 horse power of water power, to Sullivan Fenner or assigns 500 horse power of water power, under his contract with the Canal Commission, and to furnish the city of Columbia 500 horse power of water power at any point between the source of the canal and Gervais street the city may select; and shall, as soon as is practicable, complete the canal down to Congaree river a few yards above the mouth of Rocky branch: Provided, that the right of the state to the free use of the said 500 horse power shall be absolute, and any mortgage, assignment or other transfer of the said canal by the said board of trustees or their assigns shall always be subject to this right.'