APPEAL from the Court of Claims.
The Chicago and Northwestern Railway Company owns and operates lines of railroad, of which parts were constructed by companies which severally received from the United States, to aid in their construction, grants of public lands, to which was attached this condition: 'The United States mail shall be transported over such roads, under the direction of the Post-Office Department, at such price as Congress may by law direct: Provided, that, until such price is fixed by law, the Postmaster-General shall have the power to determine the same.' Ac of May 15, 1856, c. 28 (11 Stat. 9); Act of June 3, 1856, c. 42, id. 18.
In September, 1875, the company entered into three contracts in writing with the United States, acting by the Postmaster-General, each for conveying the mail on a certain route numbered and described therein, over a part of its line, for four years from July 1, 1875, at a fixed price per annum, being at the rate of a specified sum per mile. These contracts are in the usual form prescribed by the department, and specify the services to be performed, among other things requiring the company to convey, free of charge, all mail-bags and post-office blanks, and all accredited agents of the department free of charge, and to collect from postmasters on the route quarterly balances due from them to the government, and account for the same; and stipulate for the payment of fines to be imposed upon the company for certain defaults. The ninth clause of each is as follows: 'That the Postmaster-General may discontinue or curtail the service, in whole or in part, whenever the public interests, in his judgment, shall require such discontinuance or curtailment for any cause, he allowing, as a full indemnity to the contractor, one month's extra pay on the amount of service dispensed with, and a pro rata compensation for the amount of service retained and continued.'
These contracts were made by the Postmaster-General under the authority of the following sections of the Revised Statutes:--
'SECT. 3942. The Postmaster-General may enter into contracts for carrying the mail, with railway companies, without advertising for bids therefor.
'SECT. 3946. No contract for carrying the mail shall be made for a longer term than four years, and no contract for carrying the mail on the sea shall be made for a longer term than two years.'
The prices agreed to be paid were in conformity to the provisions of sect. 1 of the act of March 3, 1873, c. 231 (17 Stat. 558), being sect. 4002 of the Revised Statutes.
In the act of July 12, 1876, c. 179, making appropriations for the service of the Post-Office Department, &c., Congress inserted the following provisions, viz.:--
'That the Postmaster-General be, and he is hereby, authorized and directed to readjust the compensation to be paid from and after the first day of July, 1876, for transportation of mails on railroad routes by reducing the compensation to all railroad companies for the transportation of mails ten per centum per annum from the rates fixed and allowed by the first section of an act entitled 'An Act making appropriations for the service of the Post-Office Department for the fiscal year ending June 30th, 1874, and for other purposes,' approved March 3d, 1873, for the transportation of mails on the basis of the average weight.'
'SECT. 13. That railroad companies whose railroad was constructed in whole or in part by a land grant made by Congress on the condition that the mails should be transported over their road at such prices as Congress should by law direct, shall receive only eighty per centum of the compensation authorized by this act.' 19 Stat. 79, 82.
On Aug. 18, 1876, the Postmaster-General issued an order, which was communicated to the company, reciting the foregoing provision relative to the ten-per-cent deduction, and stating that the Assistant Attorney-General of the Post-Office Department had advised, with reference to railway service performed under contract with the government, 'that when the contract has been made in due form of law with a railroad company for the transportation of the mails for a term not yet expired, such contract is not affected' by the provision.
On Oct. 20, 1876, the Postmaster-General issued another circular, reciting that provision, and also sect. 13 of the act of 1876, and informing the company that, as required by that section, a reduction of twenty per cent would be made for mail service performed after July 1, 1876, upon the routes over the roads aided by land grants.
To this notice the company replied with a protest against the proposed reduci on, as in violation of its contract.