
    NOBLE L. McGINNIS FOR GURLEY ET AL. v. THE UNITED STATES.
    [No. 15419.
    Decided February 8, 1892.]
    
      On the Proofs.
    
    McGinnis is a mail contractor. He sublets Ms route by permission. Tbe subcontractors sublet it to others without permission, who again sublet it without permission to a steamboat company. The Department annuls the contract, assigning no reason. The contractor brings suit to the use of the first subcontractors.
    
      I. Under the Aot 17th May, 1878 (20 Stat. L., p. 61), the Post-Office Department may annul a contract where a subcontractor has relot it without permission; and such annulment is effective, though no reason he assigned.
    II. The fact that the last subletting was without the knowledge or consent of the contractor does not help Mm, the contractors being in effect Ms agents in carrying out the contract, the conditions and penalties of which remain in force.
    
      The Reporters’ statement of tbe case:
    Tbe following are tbe facts of tbis case as found by tbe court:
    I. March 22,1882, Noble L. McGinnis, plaintiff herein, contracted with defendants to carry tbe United States mail between New Orleans and Port Bads, La., on route 30100,116 miles each way.
    Tbe following is tbe contract:
    “ Tbis article of contract, made tbe 4th day of March, in tbe year one thousand eight hundred and eighty-two, between tbe United States of America (acting in tbis behalf by their Postmaster-General) and Noble L. McGinnis, and W. Hustmyre and B. Weil, Alexandria, Bapides Par., La., sureties:
    
      “ Witnessetb, that whereas Noble L. McGinnis has been accepted, according to law, as contractor for transporting tbe mail on route No. 30100, from New Orleans, La., by Poydras, English Turn, Concession, Dalcour, Jesuits Bend, Belair, St. Sophie, Nero, Wood Park, Diamond, Pointe á la Hache, Lawrence, City Price, Happy Jack, Grand Prairie, Home Place, Empire, Nichols, Buras, The Forts, and Jump, to Port Bads and back, three times a week and back, and with a side supply once a week from Head of the Jetties-to Pilot Town, in due connection, in safe and suitable steamboats, and by a schedule satisfactory to the Department, at thirteen thousand and seven hundred dollars per year, for and during the term commencing the first day of July, in the year one thousand eight hundred and eighty-two, and ending with the thirtieth day of June, in the year one thousand eight hundred and eighty-six: Now, therefore, the said contractor and his sureties do, jointly and severally, undertake, covenant, and agree with the United States, and do bind themselves—
    “1st. To carry said mail within the times fixed in the annexed schedule of departures and arrivals, and so carry until said schedule is altered by the authority of the Postmaster-General of the 'United States, as hereinafter provided, and then to carry according to said altered schedule. 2d. To carry said mail in a safe and secure manner, free from wet or other injury, in steamboats, and in a separate and convenient apartment, to be suitably fitted up, under order of tbe Department, at the expense of the contractor, for the assorting and safekeeping of the mail, and for the sole and exclusive^ occupation, use, and accommodation of the Post-Office Department and its mail agent, with a sleeping apartment attached for the exclusive use of the route agent; to furnish first-class board to such agent without charge; and such mail agent is to be conveyed without further charge. In case the contractor fails to furnish such suitable accommodations, the Department shall have the right to provide a separate and convenient apartment, or other suitable accommodations, at the expense of the contractor. 3d. To take the mail, and every part of it, from and deliver it, and every part of it, into eacli post-office on the route, or that may hereafter be-established on the route, provided that it be not more than one-quarter of a mile from the steamboat landings, and into the post-office at each end of the route, and to the mail-carriers on connecting routes.
    “They also undertake, covenant, and agree with the United States, and do bind themselves, jointly and severally, as aforesaid, to be answerable for the person to whom the said contractor shall commit the care and transportation of the mail, and accountable to the United States for any damages which maybe sustained by the United States through his unfaithfulness or wantof care; and that the said contractorwill discharge any carrier of said mail whenever required to do so by the Postmaster-General; also that he will not transmit, by himself or his agent, or be concerned in transmitting, commercial intelligence more rapidly than by mail; and chat he will not carry out of the mail letters or newspapers which should go by post; and that he will not, knowingly, convey any person carrying on the business of transporting letters or other mail matter without the consent of the Department; and further, that the said contractorwill convey, without additional charge, post-office blanks, mail bags, and the special agents of the Department on the exhibition of their credentials.
    “ They further undertake, covenant, and agree with the United States that the said contractorwill collect quarterly, if required by the Postmaster-General, of postmasters on said route the balances due from them to the United States, and faithfully render an account thereof to the Postmaster-General in the settlement of quarterly accounts, and will pay over to the United States all balances remaining in his hands.
    “For which services, when performed, the said Noble L.Mc-Ginnis, contractor, is to be paid by the United States the sum of thirteen thousand and seven hundred dollars a year, to wit, quarterly, in the months of May, August, November, and February, through the postmasters on the route, or otherwise, at the option of the Postmaster-General; said pay to be subject, however, to be reduced or discontinued by the Postmaster-General as hereinafter stipulated, or to be suspended in case of delinquency.
    “It is hereby stipulated and agreed by the said contractor and his sureties that the Postmaster-General may increase tlie service or change the schedule, he allowing a pro rata increase of compensation within the restrictions imposed by law for the additional service required; but the contractor may, in case of increased service or change of schedule, relinquish the contract on timely notice, if he prefers it to the change; also that the Postmaster-General may curtail or discontinue the service in whole or in part, he allowing one month’s extra pay on the amount dispensed with.
    “It is hereby also stipulated and agreed by the said contractor and his sureties that in all cases there is to be a forfeiture of the pay of a trip when the trip is not run; and of not more than three times the pay of a trip when the trip is not run and no sufficient excuse for the failure is furnished; a forfeiture of at least one-fourth part of it when the running is so far behind time as to lose connection with a depending mail, unless it is shown that the same was not caused by neglect, or want of proper skill, or misconduct; and forfeiture of a due proportion of it when a grade of service is rendered inferior to the mode of conveyance above stipulated; and that these forfeitures may be increased into penalties of a higher amount, according to the nature or frequency of the failure and the importance of the mail; also, that fines may be imposed upon the contractor, unless the delinquency be satisfactorily explained to the Postmaster-General in due time for failing to take from or deliver at a post-office the mail, or any part of it; for suffering it to be wet, injured, lost, or destroyed; for carrying it in a place or manner that exposes it to depredation, loss, or injury, by being wet or otherwise; for refusing, after demand, to convey a mail by any steamboat which the contractor runs, or is concerned in running, on the route, beyond the number of trips above specified; or for not arriving at the time set in the schedule, unless not caused by neglect, or want of proper skill, or by misconduct. And for setting up or running an express to transmit letters or commercial intelligence in advance of the mail, or for transporting, knowingly, or after being informed, any one engaged in transporting letters or mail matter in violation of the laws of the United States, a penalty of fifty dollars may be exacted for each offense and for each article so carried.
    “And it is further stipulated and agreed by the said contractor and his sureties that the Postmaster-General may annul the contract for repeated failures; for violating the Post-Office laws; for disobeying the instructions of the Department; for refusing to discharge a carrier, or any other person having charge of the mail by their direction, when required by the Department; for setting up or running an express as aforesaid; or for transporting persons conveying mail matter out of the mail as aforesaid; or whenever the contractor shall become a postmaster, assistant postmaster, or member of Congress; and this contract shall in all its parts be subject to all the terms and requisitions of an act of Congress passed on the 21st day of April, in the year of onr Lord 1808, entitled “An act concerning public contracts,” and of the act of Congress approved May 17, 1878, entitled “An act to regulate the advertising of mail lettings, and for other purposes.”
    # * # * * * #
    II. By permission of the Post-Office Department, previously obtained, said McGinnis sublet the route described in the foregoing contract, and the postal service therein provided, to Lloyd J. Belt and J. "Ward Gurley, jr. The following is the contract so made:
    “ This article of agreement, made this twenty-second day of April, A. D. 1882, by and • between Nicholas L. McGinnis, party of the first part, and Lloyd Belt and J. Ward Gurley, jr;, and Henry E. Harper and William Fagan, as their sureties, party of the second part:
    “Witnesseth that the said second party agrees to and binds themselves to transport the United States mail on roul e No. 30100, from New Orleans, Louisiana, to Port Eads and Pilot Town, La., and back, three times a week, for and during the term of four years, beginning the first day of July 1882, and continuing until the thirtieth day of June, 1886.
    “And the said second party and sureties do, jointly and severally, agree and bind themselves to carry said mail with certainty, celerity, and security, according to the schedule prescribed by the Postmaster-General of the United States for this route, and also in accordance with all the laws, rules, and regulations of the Post-Office Department pertaining to the conveyance of mails, for which service, when duly performed, the said first party agrees and bind himself to pay to second part (or their agent) the sum of thirteen thousand seven hundred dollars a year, payable quarterly, said second party to receive the same directly from the United States for service on said route, subject to such reduction or increase as may be made in accordance with the provisions of the contract. Jt is agreed that there shall be performed by the party of the second part all increased or diminished service that may be ordered by the Postmaster-General on said route, receiving a pro rata increase or diminution of pay, as the case may be.
    “ It is further agreed that all fines, deductions, and forfeitures for failures, or other causes on this route, imposed by the Postmaster-General, shall be deducted quarterly from any money that maybe due the parties of the second part from the party of the first part; and it is further agreed that the indemnity of one month’s extra pay for curtailment, reduction, or discontinuance of service shall be paid directly by the United States to the parties of the second part.”
    III. August 10, 1882, Order No. 12503 was issued, increasing service over a portion of said route from September 1,1882, and an additional allowance of $0,019.16 per annum was made to the contractor and subcontractors pro rata.
    IY. Plaintiff and his .subcontractors caused the mail to be carried on said route by Henry E. Harper and said Belt, proprietors of a steamboat line upon the Mississippi, and have received full pay therefor up to December 20,1885. Thereafter until June 30,1886, they were ready and willing to continue to carry said mail.
    Y. The 4th day of October, 1882, said Henry E. Harper and said Lloyd T. Belt, without the consent of the Postmaster-General, executed an agreement with the Bed Biver and Coast Line, by which their said contract was sublet and transferred. Said agreement, inter alia, reciting—
    “That the said Harper and Belt' are bound by a contract with the Government of the United States to carry a daily mail from New Orleans to the various postal landings on the lower coast of the Mississippi Biver, and it is necessary that said contract be carried into effect to avoid the heavy penalties for neglecting to do so.
    *******
    “ It is further agreed that the said party of the second part (meaning the company) will carry the daily mail for the Government of the United States to and from the port of New Orleans and to and from the lower coast as the same is now being carried by the party of the first part under the terms and conditions of the contract of the said party of the first part during the term of said contract, viz, to the 30th day of June, 1886, for the price and sum of $12,000 per annum, payable quarterly; that is, when Henry E. Harper and Lloyd T. Belt receive their pay from the Government or its original contractors said transportation from date to the 1st of J anuary, 1883, to be for the sum of $1,105.14.
    ****** *
    “And it is further agreed that in the event of any increase or decrease in the mail service, then the Bed Biver and Coast Line to receive pay in proportion to the present contract. Fines for failures to be paid by party of second part.”
    
      YI. — December 9,1885, Order No. 16752 was issued by the Postmaster-General, as follows:
    . u Send out new contract in tbe name of the Red River and Coast Line, Charles P. Truslow, of New Orleans, La., president, for service from New Orleans to Port Bads, La., and back, 6 times a week; from New Orleans to Buras, 79 miles, three times a week; from Buras to Port Bads, 37 miles, with side supply once a week from Head Jetties to Pilot Town, 12 miles, from December 21,1885, to June 30,1886, at the rate of $12,000 per annum, and when returned and executed with sureties to be approved by the Postmaster-General, accept the same under the act of May 4th, 1882, in lieu of the existing contract of Noble L. McGinnis.” .
    VII. December 18,1885, Order No. 17164 was issued by the Postmaster-General, as follows:
    
      u The Red River and Coast Line having executed contract under the provisions of Order No. 16752, of December 9,1885, accept said contract and annul the contract of Noble L. McGinnis from December 20,1885, and terminate subcontract of Lloyd T. Belt and J. Ward Gurley, jr., from same date.”
    VIII. The 22d day of December, 1885, Order No. 17307 was issued by the Postmaster-General, as follows:
    
      u 30100 (steamboat), Louisiana, New Orleans to Port Eads, 116 m. main line, 12 ms. side supply, 6 a. w., 12 ms. Service having been perrormed by the Red River and Coast Line, Charles P. Truslow, prest., of New Orleans, La., in behalf of the subcontractors, of record under an agreement providing for compensation at the rate of $12,000 per annum, make payment accordingly for services performed from October 1 to December 20,1885, subject to fines and deduction, and charged to contractor and subcontractors, unless the amount due shall have been paid by the contractor or the original subcontractors on or before Feb’y 28,1886, as provided by the act of May 4,1882.”
    IX. Except as may appear from the preceding findings the Post-Office Department assigned no reason for annulling the contract with McGinnis and for terminating the Gurley and Belt subcontract.
    X. Pursuant to the order set forth in the sixth finding, a contract was executed between the Red River and Coast Line and the United States, bearing date the 9th day of December, 1885, which provided for carrying the mails on the route referred to in the original subcontracts between Noble L. McGinnis and Guriy and Belt, and Harper and Belt, and said Red River and Coast Line, for and during tbe term commencing on tbe 21st day of December, 1885, and ending on tbe 30tb day of June, 1886, for tbe annual consideration of $12,000.
    XI. After tbe execution of tbe said contract with tbe Eed Eiver and Coast Line, McGinnis and bis subcontractors were not allowed to carry mail on said route under their contract (tbe same being carried by said line), and they were paid no compensation for carrying tbe mail after December 20,1885, nor have they received any allowance by way of indemnity or otherwise for tbe action of tbe Department in terminating tbe contracts.
    XII. As required by tbe regulations of tbe Post-Office Department, tbe custody of tbe mails on said route and its distribution were intrusted to tbe mail agents of tbe Department during tbe entire contract term.
    
      Mr. William Small for tbe claimant.
    
      We submit that to suppose tbe purpose of tbe act was to enable an executive officer to take advantage of technical delinquencies on the part of mail contractors, so as to save money to tbe Government, is too unreasonable and absurd for serious consideration. Granted, however, for tbe sake of tbe argument, that such was tbe intention of Congress, we submit further that the same could not be legally carried into effect in a case like that in question so as to divest vested rights and deprive a person of bis property without due process of law.
    Tbe act in question being incorporated in an annual appropriation bill, and in express terms as a jproviso thereto, it should be construed as a relative or dependent clause, and, therefore, as having tbe same period of duration as the legislation to which it is affixed, namely, tbe fiscal year 1883, and as being restricted in its operations to tbe class of contracts specified in tbe clause or paragraph to which it is appended, namely, star service contracts. And further we submit that legislation of this character, having for its object tbe cancellation of contracts, affixed to' annual appropriation bills should always be presumed as relating exclusively to tbe same class of persons and tbe same period of time as the appropriation to which it is immediately affixed, and that this presumption should always prevail if not in direct conflict with the language of tlie enactment.
    The proviso must be construed strictly: First, because it is in conflict with the spirit if not the letter of the Constitution of the United States, in that it invests an executive officer with a large discretionary power the abuse of which might work great hardship and oppression, both the theory of our Government and the genius of our institutions being fundamentally opposed to what has been aptly described as the law of tyrants — discretionary power; second, because it is in derogation of the common law with regard to the divesting of rights; the mutuality and equality of conditions entering into contract obligations; third, because it is penal in its nature and effect, the forfeiture of contract contemplated by it being a punishment of unusual severity, and it is well known that all courts of justice regard laws of that character with great disfavor, if not aversion.
    It is hardly necessary to refer to the well-established rule that statutes are to be construed as taking effect prospectively and never retrospectively, unless the language of the act expressly and in the most direct and unequivocal terms so provides. The actin question, particularly the provisos first and second, held to be applicable to this case, cannot be construed as operating retrospectively without a most palpable and flagrant violation of all rules and decisions on this point, and it is insisted on that it should be confined in its application to contracts entered into subsequent to the date of its approval, May 4, 1882, aud then only to the original contracts, there being no privity of contract between the Government and a submail contractor.
    It is true that the subcontract in this case is dated subsequent to the date of approval of the act in question, also that at a still later date arrangements were made for the performance of the service by the Red River and Ooast Line Company under an agreement between that company and Harper and Belt, the agents of the subcontractors; but it is submitted that these facts do not affect the rights of the subcontractor, for the law in question having no application to the original contract, as it was executed antecedent to the date of its approval, a fortiori can have no application to the subletting of said contract; to hold otherwise would be contrary to all principles both of morals and law respecting the relations of principals and agents, for tbe subcontractors in tbis case are but tbe agents of tbe contractor. Furthermore, it will be observed that tbe act in question does not prescribe a penalty against a subcontractor, and tbe same cannot be supplied by intendment without doing violence to all rules of construction respecting penal statutes.
    Again, notwithstanding tbe recognition of tbe subcontract by the Government, tbe original contractor and bis sureties are held responsible to tbe Government for tbe proper performance of tbe service until tbe end of tbe contract term, June 30,1886.
    Tbe original contract in question was awarded to McGinnis, as tbe lowest bidder, under tbe regular advertisement of October, 1881. It was sublet by him to Gurley and Belt April 22,1882, under a written permit of tbe Postmaster-General, dated April 13,1882. Tbe proposal and contract by McGinnis and bis sureties are in proper form, and neither their validity nor sufficiency has ever been questioned, nor has any intimation ever been made that McGinnis lias done anything unlawful or improper in connection with this or any other mail contract.
    Besides being unauthorized by law, tbe action of tbe Post-Office Department in tbis case was exceptional and contrary to tbe policy and long-established customs of tbe Department, for we venture the assertion that in no other case has the Post-Office Department proceeded to annul a contract without first advising tbe contractor of tbe complaints against him and affording opportunity for their correction.
    
      Mr. Henry M. Foote (with whom was Mr. Assistant Attorney-General Ootton) for tbe defendants.
   Davis, J.,

delivered tbe opinion of tbe court.

In March, 1882, McGinnis, the plaintiff herein, entered into a contract with tbe Post-Office Department to carry tbe mails upon tbe lower Mississippi; this contract be afterwards sublet, with tbe consent of tbe Post-Office Department, to Gurley and Belt, for whose use be now sues. Tbe service was subsequently increased, aud an extra allowance was made tbe contractor and subcontractors.

In October, 1882, Gurley and Belt employed Harper and Belt, who were proprietors of a steamboat line upon tbe Mississippi, to carry the mails upon this route, and they were succeeded in this service by the Eed Eiver and Coast Line Company. In December, 1885, the Postmaster-General annulled the contract with McGinnis, and awarded a contract for the same service to the Eed Eiver and Coast Line, which was then in fact carrying the mails (in place of Harper and Belt and by agreement with them) for the subcontractors under Mc-Ginniss. This contract was made evidently for economy, and the McGinniss contract was annulled, because it appeared that the mails were being transported by parties other than the subcontractor. The legality of the action of the Postmaster-General in thus terminating the contract is the issue now presented.

The law of May 17, 1878, contains provisions relating to the subletting of post-office contracts (act May 17, 1878, 1 Sup). Rev. Stat., 2d ed., p. 164). Therein the “subletting or transfer ” of a contract is forbidden “ without the consent in writing of the Postmaster-General;” otherwise the contract “shall be considered as violated, and the service may be again advertised,” and the contractor with his sureties shall be liable for any damage resulting to the United States.

Section 3 of the same act provides for the course which shall be followed by the contractor when he shall “lawfully sublet” or “ lawfully employ any other person or persons to perform the service by such contractor agreed to be performed, or any part thereof.” Plaintiff did not comply with this section, nor, so far as appears, did he attempt to do so in regard to the service performed by Harper and Belt or the Eed Eiver Line; nor as to them did he comply with the demands of postal regulation No. 626, which contains provisions to enforce the third section of the act of 1878, above cited. It does not even appear whether McGinnis knew of the employment by his subcontractors of Harper and Belt first, and later of the Eed Eiver Company, nor does it appear that the Post-Office Department notified him of the fact prior to annulling the contract. This, however, does not affect the equities of the case, for McGinnis claims no recovery, but sues only for the benefit of Gurley and Belt, who employed Harper and Belt and the Eed Eiver Company to transport the mails for them.

An act passed May 4, 1882, has been discussed at some length, but we do not find it necessary to consider its effect in the view which we take of this case.

Tbe contractor agreed “that this contract shall, in all parts, be subject to the terms and requisitions of an act of Congress passed the 21st day of April, 1808, and of the act of May 17, 1878.” Such an express agreement was not necessary, as in any event the contract was subject to'existing statutes, but as a measure of precaution it was perhaps well to give the contractor notice in fact, as well as in law, of his obligations and duties. The act of 1878, as we have already seen, forbade a subletting of the contract except under certain conditions not fulfilled in this case.

McGinnis’s right under the law and contract was to perform a certain service himself for a certain renumeration. He could, under certain conditions, employ others as subcontractors to perform the service for him, but he was prohibited from pursuing this course unless these conditions were fulfilled under penalty of forfeiture. Not one of the conditions prescribed was fulfilled in this case. The contract having been violated, it remained discretionary with the Postmaster-General to advertise for the service or to continue it. The fact that the letting to the Red River Company was by the subcontractors and not by McGinnis does not benefit him, for they in effect acted as his agents in carrying out the original contract, and, in subletting to them, the various conditions and penalties of the original contract remained in force. Belt and Gurley acquired no rights under the subcontract which McGinnis did not have; they were released from no penalties to which he was subject. The contract was annulled for sufficient cause to — wit, “violating the post-office laws,” and plaintiff is not entitled to any recovery.

Petition dismissed.  