1882.

CLARK V. BARNARD.

Gray, 42; Leary v. Laflin, 101 Mass., 334; Hodges v. King, 7 Met., 583; Gowen v. Gerrish, 15 Me., 273.

In conclusion, therefore, it is clear that, from a period at least as early as the year 1650, down to the present time, bonds have constituted a distinct class of instruments, the effect of which, like the effect of a conveyance to A and his heirs, is always the same.

Consequently, if in a particular case parties have expressed their obligation in the form of a bond, their liability is thereby determined to be an obligation to perform the condition, or pay the damages actually sustained from nonperformance thereof.

Mr. Justice Matthews delivered the opinion of the court:

The appellees, who were complainants below, filed their bill in equity, as assignees in bankruptcy of the Boston, Hartford and Erie Railroad Company, against Samuel Clark, General Treasurer of the State of Rhode Island, and the City of Boston, and Frederick U. Tracey, its Treasurer. The bill alleged that the Boston, Hartford and Eric Railroad Company was a corporation created by the States of Connecticut and Massachusetts for the purpose of building, acquiring and operating a railroad from Boston in Massachusetts to Willimantic in Connecticut, and from Providence in Rhode Island to Willimantic, and from Willimantic through Waterbury to the state line of Connecticut, and thence to Fishkill in New York; that the directors of the company, without authority from the corporation or by law, applied to the Legislature of Rhode Island in 1869 and obtained the passage of an Act entitled "An Act in Addition to an Act to Ratify and Confirm the Sale of the Hartford, Providence and Fishkill Railroad to the Boston, Hartford and Erie Railroad Company," by which the company was authorized to locate and construct a railroad in extension of its line of railroad purchased of the Hartford, Providence and Fishkill Railroad Company, commencing at its depot in Providence, thence running to the easterly line of the State in or near the Village of Valley Falls, to meet and connect with a Massachusetts railroad extending through North Attleborough from Boston, so as to make a continuous line of railroad, in a northerly and southerly direction, between Providence and Boston; that this Act contained a provision in the following terms: "This Act shall not go into effect unless the said Boston, Hartford and Erie Railroad Company shall, within ninety days from the rising of this General Assembly, deposit in the office of the General Treasurer its bond, with sureties satisfactory to the Governor of this State, in the sum of $100,000, that they will complete their said road before the first day of January, A. D. 1872;" that this condition was not complied with, and that the said Act therefore never took effect and is wholly null and void; that after the passage of the Act, the directors and officers of the corporation, without authority and in abuse of their trust and duty, filed with one Samuel Parker, then the General Treasurer of Rhode Island, a a paper, purporting to be the bond of the corporation, but without sureties, and fraudulently took of the funds of the corporation the sum of $100,000 and deposited the same with the city

treasurer of Boston, in exchange for the obliga-
tion of that city, a copy of which is as follows:
"Temporary Loans, City of Boston.
No. 6.
$100,000.
This certifies that, for value received, there
will be due from the City of Boston, payable at
the office of the city treasurer, on demand, after
the first day of December next, to the General
Treasurer of the State of Rhode Island, or order,
the sum of $100,000, with interest at the rate of
seven per cent per annum, in current funds.

This loan being authorized by an order of the city council passed the 9th day of June, 1869, to anticipate the income of the present financial year.

Interest will not be allowed after this note is

due.

June 28, 1869. Alfred T. Turner, Auditor.
Nath'l B.
Fred. U. Tracey, Treasurer.
Shurtliff, Mayor.'

That the directors and officers of the company, without consideration and without authority, deposited this certificate and obligation with the said Parker, who received the same without warrant of law, and thereupon held the same to the use of the railroad company; that the corporation never accepted the Act of the Legislature recited; that the railroad authorized thereby has never been built nor any work done thereon, nor has the State of Rhode Island, nor any citizen thereof, suffered any damage or loss by reason thereof; that the General Assembly of Rhode Island considered that the filing of the certificate and obligation of the City of Boston was not a compliance with the Act, and did not ratify the taking of the same till after the bankruptcy of the railroad company; that said bankruptcy was adjudicated on October 21, 1870, and the complainants became assignees in bankruptcy of said company from that date, and entitled to the money represented by the said certificate; that Samuel Parker having died, the respondent Clark succeeded him as General Treasurer of Rhode Island, and came into possession of the said certificate, which, it is alleged, however, he holds wrongfully, and in his individual and not his official capacity, and to the use of the complainants, but which, nevertheless, he threatens to collect and withhold from them the proceeds thereof.

The prayer of the bill is, "That the said respondent Clark may be decreed to have no right, title or interest in or to the said paper writing A, or in or to the said money so deposited with the said respondent Tracey, or to any part thereof, and that he may be decreed to assign and deliver over the said paper A to your orators, and may be enjoined and restrained from presenting the same to the said respondent Tracey, or to the said City of Boston, or from receiving any money or payment whatsoever thereon, or therefor or any part thereof, or from receiving or holding the said sum of $100,000, or any part thereof, from the said respondent Tracey, or the said City of Boston, and that the said respondent Tracey and the said City of Boston may be decreed to pay over to your orators, as assignees as aforesaid, the said sum of $100,000, with interest thereon, and may be enjoined and restrained from paying the same or any part thereof, or any money on account thereof, to the said respondent Samuel Clark, the General Treasurer of the State of Rhode Island, and

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that your orators may have such other and fur-| bind itself and its successors firmly by these ther relief as to Your Honors shall seem meet, presents. and as the nature and circumstances of the case shall require."

On final hearing, the fund was awarded to the appellees; and from that decree Clark, General Treasurer of the State of Rhode Island, and the State of Rhode Island appealed. The State itself is a party to the appeal bond, which recites that the State of Rhode Island was an intervener and claimant of the fund in court, and We are relieved, however, from its considerathat a decree was rendered against it as such. tion by the voluntary appearance of the State in The bond, executed and delivered by the Bos-intervening as a claimant of the fund in court. ten, Hartford and Erie Railroad Company to the State of Rhode Island, is as follows:

controversies between it and citizens of other States. In the present case, the State of Rhode Island appeared in the cause and presented and prosecuted a claim to the fund in controversy, and thereby made itself a party to the litigation to the full extent required for its complete determination. It became an actor as well as defendant, as by its intervention the proceeding became one in the nature of an interpleader, in which it became necessary to adjudicate the adverse rights of the State and the appellees to the fund, to which both claimed title. The case differs from that of Ga. v. Jesup [ante, 216]. where the State expressly declined to become a party to the suit and appeared only to protest against the exercise of jurisdiction by the court. The circumstance that the appearance of the State was entered without prejudice to the demurrer of Clark, the General Treasurer, does not affect the result. For that demurrer could not reach beyond the question of the right to sue Clark by reason of his official character, which became insignificant when the State made itself a party; and in point of fact, the bill was framed to avoid the objection, by charging Clark as a wrong-doer in his individual capacity. For the groundwork of the bill, whether it be regarded as directed against the officer or the State, is, that the transaction throughout was void, as ultra vires the corporation. And this presents the next question to be considered.

That question arises and is to be determined upon the following statement of facts:

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and transfer of the Hartford, Providence and Fishkill Railroad, its property and franchises, to the Boston, Hartford and Erie Railroad Company was ratified and confirmed, so far as said railroad was situated in that State; and it was thereupon further enacted, that the "Said Boston, Hartford and Erie Railroad Company, by that name, shall and may have, use, exercise and enjoy all the rights, privileges and powers heretofore granted and belonging to said Hartford, Providence and Fishkill Railroad Company, and be subject to all the duties and liabilities imposed upon the same by its charter and the general laws of this State."

The Hartford, Providence and Fishkill Railroad Company was, without question, so far as it owned and operated a railroad within the State of Rhode Island, a corporation in and of that State; and the Boston, Hartford and Erie Railroad Company became its legal successor in that State, as owner of its property, and exercising its franchises therein, and became, therefore, in respect to its railroad in Rhode Island, a corporation in and of that State.

Thereafter, in January, 1869, the Legislature of Rhode Island passed the Act out of which the present litigation has grown, entitled "An Act in Addition to an Act Entitled 'An Act to Ratify and Confirm the Sale of the Hartford, Providence and Fishkill Railroad to the Boston, Hartford and Erie Railroad Company.' In its 1st section it is enacted as follows:

"The Boston, Hartford and Erie Railroad Company, a corporation created by the General Assembly of the State of Connecticut, are hereby authorized and empowered to locate, lay out and construct a railroad in extension of their line of railroad by them purchased of the Hartford, Providence and Fishkill Railroad Company, commencing at a point in its said purchased railroad at or near its freight depot in the City of Providence, thence running westerly and northerly by a line westerly of the state prison, a little easterly of the Rhode Island Locomotive Works, and thence by nearly a straight line, and crossing or running near to Leonard's Pond (so called), and thence passing between the Villages of Pawtucket and Lonsdale, and over and above the Providence and Worcester Railroad; thence continuing to the easterly line of the State in or near the village of Valley Falls, there to meet and connect with a railroad extending westerly through North Attleborough, from the direction of Boston, authorized by the Commonwealth of Massachusetts."

The Boston, Hartford and Erie Railroad Company was originally created a corporation by the laws of Connecticut. Its charter conferred authority upon it in these terms: 'Said Boston, Hartford and Erie Railroad Company may purchase * *the franchise, the whole or any part of the railway or railway property of any railroad company, located in whole or in part in this State, whose line or a portion of whose line of railway, constructed or chartered, now forms part of a railway line from the harbor of Boston, passing through Thompson to Willimantic, and from Providence through Willimantic to Hartford, Waterbury and thence toward the North River, with the purpose of reaching a point at or near Fishkill, in the State of New York; * * and said Boston, Hartford and Erie Railroad Company may make any lawful contract with any other railway company with which the track of said railroad may connect, in relation to the business or property of the same; and may take lease of any railroad, or may lease their railway to, or may make joint stock with, any connecting railway com- "Said railroad, when the same shall have been pany in the line of and forming a necessary part constructed, shall be managed and protected in of and running in the same general direction as, all respects according to the provisions of and their said route, and between its terminal points." be subject to an Act entitled An Act to IncorIn pursuance of this authority, the Boston,porate the Providence and Plainfield Railroad Hartford and Erie Railroad Company purchased Company,' and the several Acts in addition to the franchises and railroad of the Hartford, and amendment thereof, and the general laws Providence and Fishkill Railroad Company. of the State." This latter company was a consolidated corporation, deriving its existence and powers from the laws, both of Connecticut and Rhode Island, whose road, as defined in the Acts of incorporation, constituted a line within the general description contained in the section from the charter of the Boston, Hartford and Erie Railroad Company, already quoted. By a subseqnent Act of the Legislature of Rhode Island, the sale

The 8th section of the Act is as follows:

The Act thus referred to as the Act to incorporate the Providence and Plainfield Railroad Company, was the charter of the corporation by that name, in the State of Rhode Island, that, by consolidation with a Connecticut company, formed the Hartford, Providence and Fishkill Railroad Company.

The 12th section of the Act, recited in the complainant's bill, is as follows:

"This Act shall not go into effect unless the said Boston, Hartford and Erie Railroad Company shall, within ninety days from the rising of this General Assembly, deposit in the office of the General Treasurer its bond, with sureties satisfactory to the Governor of this State, in the sum of $100,000, that it will complete its said road before the first day of January, A.D. 1872." This Act of the Legislature of Rhode Island was duly accepted by the stockholders of the Boston, Hartford and Erie Railroad Company; the bond required by the 12th section, as already set out, was executed and delivered; and the certificate of indebtedness, in lieu of sureties, was given by the company and accepted by the State. It is now argued by counsel for the appellees, that the party which, in all these transactions, was dealing with the State of Rhode Island was the Boston, Hartford and Erie Railroad Company in its character as a corporation of the State of Connecticut; that, as such, it had no power, under the charter granted by that State, to build or own a railroad directly connecting Boston and Providence, nor had it, as such, any capacity to receive a grant of such a franchise; that, consequently, everything done or attempted in that behalf was ultra vires and void.

property within its territorial jurisdiction. That this may be done was distinctly held in R. R. Co. v. Wheeler, 1 Black, 297 [66 U. S., XVII., 133]." The same view was taken in R. Co. v. Whitton, 13 Wall., 270 [80 U. S., XX., 571]; in R. R. Co. v. Vance, 96 U. S., 459 [XXIV., 756]; and in R. R. Co. v. Alabama [ante, 518], decided at the present Term. The question of the powers of the Boston, Hartford and Erie Railroad Company, as a corporation in Rhode Island, and of the legal effect of its acts and transactions performed in that State, is to be determined exclusively by the laws of that State, and not by those of Connecticut, which have no force beyond its own territory. It results, therefore, that the doctrine of ultra vires, as here urged by the appellees, has no place in this controversy.

It is, however, urged on behalf of the appellees, and this was the ground on which the decree below proceeded, that the obligation required by the statute and given by the company, was a bond, in the penal sum of $100,000, conditioned that the company would completely build its road within the period limited, upon which no recovery can be had, except for such damages as may be shown to have resulted to the State of Rhode Island from the breach of its condition; that no damage on that account is proven, it being in fact admitted that none act

But the Boston, Hartford and Erie Railroad Company was also a corporation of Rhode Island. As such, it owned and operated a railroad within that State, and had received and ex-ually resulted; that the certificate of indebtedercised franchises under its laws, to which it was in all respects subject. It was the assignee of the road and rights connected therewith, formerly belonging to the Hartford, Providence and Fishkill Railroad Company; and it was this corporation, dwelling and acting in Rhode Island, that the Legislature, by the Act in question, authorized to exercise the additional powers it conferred.

ness and the fund which has arisen from its payment, were pledged merely, in lieu of sureties, as collateral security for the satisfaction of the bond; and that, consequently, the claim of the State of Rhode Island against it having thus failed, that fund reverts to the appellees.

of instruments, the effect of which is always the same, in the same sense that the effect of a conveyance to A and his heirs is always the same. Such is the rule of equity. Such was the effect of the statutes. Consequently, if in a particular case, parties have expressed their obligation in the form of a bond, their liability is thereby determined to be an obligation to perform the condition or pay the damages actually sustained from non-performance thereof;" and as a statement of the rule, they cite the following passage, 2 Sedgwick, Damages, 7th ed., 259, n., "Of course, in this class of agreements, as in all others, when the contract takes the ordinary form of a penal bond, the sum fixed will invariably be regarded as a penalty; and this might well be put, at the present day, on the ground of intention, as derived from the writing itself, for this form of instrument is in such common use that persons who resort to it must be held to have in view its legal consequences."

The proposition of counsel for the appellees, as stated by them, is that, "From a period at least as early as the year 1650 down to the presIf it had had no previous existence as a corpo-ent time, bonds have constituted a distinct class ration under the laws of Rhode Island, it would have become such by virtue of the Act in question. For although as a Connecticut corporation, it may have had no capacity to act or exist in Rhode Island for these purposes, and no capacity by virtue of its Connecticut charter, to accept and exercise any franchises not contemplated by it, yet the natural persons, who were corporators, might as well be a corporation in Rhode Island as in Connecticut; and, by accepting charters from both States, could well become a corporate body, by the same name, and acting through the same organization, officers and agencies, in each, with such faculties in the two jurisdictions as they might severally confer. The same association of natural persons would thus be constituted into two distinct corporate entities in the two States, acting in each according to the powers locally bestowed, as distinctly as though they had nothing in common either as to name, capital or membership. Such was in fact the case in regard to this company, so that in Rhode Island it was exclusively a corporation of that State, subject to its laws and competent to do within its territory whatever its legislation might authorize. 'Nor do we see any reason," as was said by this court, Mr. Justice Swayne delivering its opinion, in R. R. Co. v. Harris, 12 Wall., 65-82 [79 U. S., XX., 354358], "why one State may not make a corporation of another State, as there organized and conducted, a corporation of its own, quoad any

While this may be accepted as a sufficiently accurate statement of the general rule, as to bonds with conditions, designed as an indemnity between private persons for non-performance of a collateral agreement, yet, in respect to such cases, it cannot be considered as universally true. "It is often a doubtful question," said the Supreme Judicial Court of Massachusetts in Hodges v. King, 7 Met., 583-587, "whether the sum stipulated to be paid on the non-performance of a condition is in the nature of a penalty,

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or is the amount settled by the parties for the made, then, if the penalty is to secure the mere purpose of making that certain which would payment of money, courts of equity will relieve be otherwise uncertain. * The bond the party, upon paying the principal and interhas, indeed, a condition; but that is a matter of est. If it is to secure the performance of some form and cannot turn that into a penalty which, collateral act or undertaking, then courts of but for the form, is an agreement to pay a pre-equity will retain the bill, and will direct an iscise sum under certain circumstances." So that sue of quantum damnificatus; and when the it cannot correctly be said to be true, in all such amount of damages is ascertained by a jury, cases, that the intention to treat the sum named upon the trial of such an issue, they will grant in the bond as a penalty to secure the perform-relief upon payment of such damages." Eq. ance of the condition, and to be discharged on Jur., sec. 1314. payment of damages arising from non-performance, can be inferred as a rule of law, or a conclusive presumption, from the mere form of the obligation.

And Mr. Adams, in his treatise on Equity, 6th Am. ed., 107, says, on the same subject: "The equity for relief against enforcement of penalties originates in the rule which formerly prevailed at law, that, on breach of a contract secured by penalty, the full penalty might be enforced, without regard to the damage sustained. The court of chancery, in treating contracts as matters for specific performance, was naturally led to the conclusion that the annexation of a penalty did not alter their character; and, in accordance with this view, would not, on the one hand, permit the contracting party to evade performance by paying the penalty; and, on the other hand, would restrain proceedings to enforce the penalty on a subsequent performance of the contract itself, viz.: in the case of a debt, on payment of principal, interest and costs; or in that of any other contract, on re-imbursement of the actual damage sustained."

It has accordingly been uniformly held, in cases too numerous for citation, that courts of equity will not interfere in cases of forfeiture for the breach of covenant and conditions where there cannot be any just compensation decreed for the breach; for, as was said by Lord Chancellor Macclesfield, in Peachy v. Duke of Somerset, 1 Str., 447, S. C., Prec. Ch., 568, 2 Eq. Cas. Abr., 227, “It is the recompense that gives this court a handle to grant relief."

Originally, at law, in case of breach of the condition of a bond, the amount recoverable was that named in the obligation. So that, if the condition is impossible either in itself or in law, the obligation remains absolute. As "If a man be bound in an obligation, etc., with condition that if the obligor do go from the Church of St. Peter in Westminster to the Church of St. Peter in Rome within three hours, that then the obligation shall be void. The condition is void and impossible, and the obligation standeth good." So, again, if the condition is against a maxim or rule in law, as, "If a man be bound with a condition to enfeoff his wife, the condition is void and against law, because it is against the maxim in law, and yet the bond is good." Co. Litt., 206 b. So, where the condition is possible at the date of the instrument and becomes impossible subsequently, the obligation does not become thereby discharged, unless the impossibility of performance was the act of God, or of the law, or of the obligee. Accordingly, it was held by this court in Taylor v. Taintor, 16 Wall., 366 [83 Ụ. S., XXI., 287], that when a person arrested in one State on a criminal charge, and released under his own and his bail's recognizance, that he will appear on The application of this principle becomes a day fixed and abide the order and judgment more manifest in cases where a public interest of the court, on process from which, he has or policy supervenes, as where, for non-complibeen arrested, goes into another State, and while ance by stockholders in corporations engaged in there, is, on the requisition of the Governor of undertakings of a public nature, with the terms a third State, for a crime committed in it, de- of payment of installments due on account of livered up, and is convicted and imprisoned in their shares, by which a forfeiture of the stock such third State, the condition of the recogni- and of all previous payments thereon has been zance has not become impossible by act of law incurred and declared, the courts refuse to grant so as to discharge the bail; "The law which relief. Sparks v. Proprs. of Liverpool Waterrenders the performance impossible, and there-works Co.,13 Ves.,428; Prendergast v. Turton, 1 fore excuses failure, must be a law operative in Younge & C. (Ch.),98; Naylor v. South Devon R. the State when the obligation was assumed and Co., 1 DeGex & S., 32; Ludlow v. Dutch Rhenish obligatory in its effects upon her authorities." R. Co., 21 Beav., 43. The ground, nature and limits of the juris- In the case of Sparks v. Proprietors of Liverdiction of courts of equity to relieve against pen-pool Waterworks Co.,13 Ves.,433, Sir Wm. Grant, alties in such instruments is well stated by Mr. M. R., said: "The parties might contract upon Justice Story, in this language: any terms they thought fit, and might impose terms as arbitrary as they pleased. It is essential to such transactions. This struck me as not like the case of individuals. If this species of equity is open to parties engaged in these undertakings, they could not be carried on. * * Why is not this equity open to contractors for government loans? Why may not they come here to be relieved when they have failed in making their deposit? And if they could have relief, how could government go on? It would be just as difficult for these undertakings to go on. If compensation cannot be effectually made it ought not to be attempted.'

"In short, the general principle now adopted is that, wherever a penalty is inserted merely to secure the performance or enjoyment of a collateral object, the latter is considered as the principal intent of the instrument, and the penalty is deemed only as accessory and, therefore, as intended only to secure the due performance thereof or the damage really incurred by the non-performance. In every such case, the true test generally, if not universally, by which to ascertain whether relief can or cannot be had in equity, is to consider whether compensation can be made or not. If it cannot be made, then courts of equity will not interfere. If it can be

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Accordingly, where any penalty or forfeiture