Statement of the Case.

227 U.S.

&c., with interest, from sales of the land. It prayed that the plaintiff be declared to have an equitable mortgage lien upon Rainey's interest, paramount to Luke's title whatever it might be. This obviously was enough to put the Lukes upon inquiry as to the precise character of a contract that was alleged, and truly alleged as it turns out, to lay the foundation for an equitable interest superior to theirs.

Judgment affirmed.

PEOPLE OF PORTO RICO v. TITLE GUARANTY AND SURETY COMPANY.

ERROR TO THE CIRCUIT COURT OF APPEALS FOR THE THIRD CIRCUIT.

No. 154. Argued January 30, 1913.-Decided February 24, 1913.

In this case held that a bond given in pursuance of an ordinance, for faithful performance of a contract, was solely for the complete result at the end of the period specified, and that it did not permit a recovery of the whole penalty upon any intermediate breach. Breaches of subordinate requirements, which are specified in a contract for a public utility and bond for performance and are simply means to an end, cannot be made the basis of recovering the whole penalty after final completion or after cancellation by the obligee of the franchise.

If within time for completion of a public utility authorized by ordinance, the municipality itself makes performance impossible, it cannot, under any system of law in Porto Rico or elsewhere, recover upon the bond for failure to perform.

180 Fed. Rep. 641, affirmed.

THE facts, which involve the liability of a surety company on a bond given for faithful performance of a contract, are stated in the opinion.

Mr. William Jessup Hand for plaintiffs in error.

Mr. John G. Johnson and Mr. Everett Warren for defendant in error.

MR. JUSTICE HOLMES delivered the opinion of the court.

This is a suit upon a joint and several bond executed by the defendant in error as surety for the Vandegrift Construction Company. In the Circuit Court a nonsuit was ordered and the order was affirmed by the Circuit Court of Appeals on the ground that the plaintiff by its own act had made performance of the condition impossible. 103 C. C. A. 607; 180 Fed. Rep. 641. The facts are these:

By an ordinance of March 2, 1903, Porto Rico granted to the Vandegrift Company the right to build and operate an electric railway and also a power plant in specified places in the island. Within one year from acceptance of the grant the grantee was to have its roadbed completely graded between the Island of San Juan and the urban portion of the municipality of Caguas, and the foundations and approaches of a certain bridge completed. Section 15. Within two years it was to have the parts of the railway lying between the urban portion of San Juan and Caguas and certain other points finished and ready for service. Section 16. Within three years it was to have the whole line completed and in operation. Section 17. It was stated to be expressly understood and agreed that upon the grantee's failure to have the line in full operation within the time limited, i. e. three years, the grantee's right to operate any part of it or to sell electric light and power should cease unless the failure should be declared by the Executive Council to be due to one of certain excuses, such as the act of God. Section 16.

A power dam at Comerio Falls was to be completed in one year and the greater part of the electric apparatus

contracted for; the whole power plant and transmission lines necessary for operating the railway to be completed within three years. Section 18. The grantee was to pay the government two per cent. of its gross receipts from the sale of light and power to private consumers, § 23, was not to charge above certain maxima fixed for passengers and freight, § 25, and was to carry certain persons, such as prisoners and police on duty, free of charge. Sections 27, 28. The rights, privileges and concessions granted by the ordinance were expressed to be subject to amendment, alteration or repeal by the Executive Council. Section 30. Then it was provided that the rights granted "shall be accepted by the grantee in writing and by executing a bond in favor of the People of Porto Rico, in the sum of one hundred thousand dollars satisfactory etc., and conditioned upon the full completion of the work herein authorized within three years after such acceptance and in accordance with the conditions herein contained, and in accordance with the plans and specifications therefor approved as herein provided; and conditioned also upon the payment by the grantee to the People of Porto Rico of any loss or damage or costs accruing against the People of Porto Rico, by reason of the construction of the works herein authorized, at any time during the period of construction herein limited" &c. Section 34.

Upon presentation of a certificate of completion from the Commissioner of the Interior, "and upon the full compliance with the terms of this ordinance to the satisfaction of the Executive Council, and upon the full payment by the grantee of any loss, damage and costs accruing against the People of Porto Rico as in said bond provided, the said bond shall be cancelled." Section 35. Finally the ordinance is to "take effect immediately upon the acceptance by the grantee of the terms and conditions hereof as above provided." Section 38.

The bond in suit was executed, referring to and annexing the ordinance, and conditioned among other things that the principal, within three years from the date of the acceptance by it of the ordinance should fully complete the work in accordance with the conditions therein contained;' and again that it should 'duly perform within the said period of three (3) years, all other terms and conditions in said ordinance required to be performed by the principal within the said period.' 1

1 The whole condition of the bond was as follows:

"Now, therefore, the condition of this obligation is such that if the said Principal shall within three years from the date of the acceptance by it of said ordinance fully complete the work therein authorized in accordance with the conditions therein contained and in accordance with the plans and specifications therefor approved as therein provided; and within the said period of three (3) years from the date of the acceptance by it of the said ordinance shall build, complete and have in operation the entire line of railway authorized therein for such terminal in the Municipality of San Juan as may be determined by the said Executive Council to its terminal on the Playa of Ponce on a route from Ponce to be determined by the said Executive Council in accordance with the conditions in said ordinance contained, and in accordance with the plans and specifications therefor approved, as in said ordinance provided, and within the said period of three (3) years from the date of the acceptance by it of the said ordinance, shall also complete and have in operation the entire power plant and transmission lines necessary for operation the said entire line of railway, in accordance with the conditions therein contained, and in accordance with the plans and specifications therefor approved as therein provided; and shall duly perform within the said period of three (3) years, all other terms and conditions in said ordinance required to be performed by the Principal within the said period; and shall pay to the obligee any loss or damage accruing against the said obligee by reason of the construction of the works in said ordinance authorized at any time during the period of construction therein limited and before the completion of said work shall have been certified by the Commissioner of the Interior, as in Section 35 of said ordinance provided-then this obligation shall be void, otherwise to remain in full force and effect.

"Provided, however, and upon the following express conditions. VOL. CCXXVII-25

Opinion of the Court.

227 U.S.

The principal failed to do within the year the work required by § 15 to be completed in that time as has been stated, and a little more than two months after the year elapsed, in July, 1904, the Executive Council passed an ordinance amending §§ 15, 18 and 30 of the former one, the amendment being approved by the President on August 2. The time allowed in § 15 was extended to January 1, 1905, provided that the number of men employed on or before August 7 should be not less than 250 and that the number should be increased up to 500 or thereabouts, the intent expressed being that as many men should be engaged as was necessary to complete the work, and provided that the men should be paid weekly, and provided further that upon failure to comply with the terms and conditions of the amendment the franchise should be subject to immediate forfeiture. The requirement in § 18 as to the power-dam at Comerio Falls, &c., also was extended to January 1, 1905. Finally to the provision in § 30 as to amendment, &c., of the concession there was added the express requirement of the approval of the Governor of Porto Rico and of the President of the United States, and the statement that it was subject to the power of Congress to annul or modify the same. This amendment seems to have been sought and accepted

"First: That no extension of the time or times limited in said ordinance for the completion of the work therein authorized or any part thereof, whether granted with or without the knowledge and consent of the Sureties, shall in any way discharge the Sureties from liability upon this bond; and,

"Second: That no suit, action or proceeding shall be brought or instituted against the Sureties after the period of five (5) years from the date hereof upon or by reason of any default on the part of the Principal in the performance of any of the terms, covenants or conditions of this bond. But all extensions of time granted under the term of the franchise shall be added to the term of five (5) years, so that the life of the bond shall be kept in full force for the five (5) years, and so much additional time as shall be covered by the extension granted."