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U.S. Supreme Court

North American Commercial Co. v. United States, 171 U.S. 110 (1898)

North American Commercial Company v. United States

No. 431

Argued April 18-19, 1898

Decided May 31, 1898

171 U.S. 110


By the agreement of March 12, 1890, between the United States and the North American Commercial Company, that company contracted to pay to the United States a rental of $60,000 per year, during the term of the contract, for the privilege of killing an agreed number of seals each year, subject to a proportionate reduction of this fixed rental in case of a limitation in the number, and also a further sum of seven dollars, sixty two and one-half cents for each seal taken and shipped by it. Held that this per capita tax was not a part of the annual rental, and was not subject to reduction as was the annual rental of $60,000 a year.

The proviso in the original act for the naming of a maximum number of seals to be taken, which was not to be exceeded, and making a proportionate reduction in the fixed rental in case of a limitation of that number, remained in force through all subsequent legislation and contracts.

Assuming that the company took all the risk of a catch reduced by natural causes, yet when the number that might be killed was reduced by the act of the government, the company was entitled to such reduction on the reserved rental as might be proper -- that is, in the same proportion as the number of skins permitted to be taken bore to the maximum.

The power to regulate the seal fisheries in the interest of the preservation of the species was a sovereign protective power, subject to which the lease was taken, and if the government found it necessary to exercise that power to the extent which appears, the company did not attempt to rescind or abandon, but accepted the performance involved in the delivery of the 7500 skins.

The company cannot maintain its counterclaim for damages for breach of the lease, and the Circuit Court erred in its disposition thereof.

This was an action brought by the United States against the North American Commercial Company to recover the sum of $132,187.50, with interest, for rent reserved for the year ending April 1, 1894, under a so-called lease, bearing date March 12, 1890, made by the Secretary of the Treasury to the company, and for royalties upon 7,500 fur seal skins taken and shipped by the company that year in virtue of that instrument, and for the revenue tax of two chanrobles.com-red

Page 171 U. S. 111

dollars on each skin. The claim of the government consisted of these items:

Annual rental. . . . . . . . . . . . . . . . . . $ 60,000.00

Revenue tax on 7,500 skins at $2 . . . . . . . . 15,000.00

Per capita at $7.62 1/2 on 7,500 skins . . . . . 57,187.50


Total . . . . . . . . . . . . . . . . . . . . $132,187.50

And interest thereon from April 1, 1894

The case was tried by the circuit court without a jury. The court found for the United States in the sum of $94,687.50, with interest, and judgment was entered in their favor for $107,257.29, principal, interest, and costs. 74 F.1d 5.

The company having taken a writ of error to the Circuit Court of Appeals for the Second Circuit, that court certified a certain question arising in the cause, concerning which it desired the instructions of this Court for its proper decision, whereupon this Court ordered that the whole record and cause by sent up for consideration. A counterclaim of the company against the United States for breach of the lease was disallowed and dismissed by the circuit court, but not on the merits, and without prejudice to the right of the company to enforce the same by any other proper legal proceeding.

The agreement of lease out of which the cause of action arose is as follows:

"This indenture, made in duplicate this twelfth day of March, 1890, by and between William Windom, Secretary of the Treasury of the United States, in pursuance of chapter 3 of title 23, Revised Statutes, and the North American Commercial Company, a corporation duly established under the laws of the State of California, and acting by I. Liebes, its President, in accordance with a resolution of said corporation adopted at a meeting of its board of directors held January 4, 1890, witnesseth: That the said Secretary of the Treasury, in consideration of the agreements hereinafter stated, hereby leases to the said North American Commercial company for a term of twenty years from the first day of May, 1890, the

Page 171 U. S. 112

exclusive right to engage in the business of taking fur seals on the Islands of St. George and St. Paul, in the Territory of Alaska, and to send a vessel or vessels to said islands for the skins of such seals."

"The said North American Commercial Company, in consideration of the rights secured to it under this lease above stated, on its part covenants and agrees to do the things following; that is to say:"

"To pay to the Treasurer of the United States each year during the said term of twenty years, as annual rental, the sum of sixty thousand dollars, and, in addition thereto, agrees to pay the revenue tax or duty of two dollars laid upon each fur-seal skin taken and shipped by it from the islands of St. George and St. Paul, and also to pay to said Treasurer the further sum of seven dollars sixty-two and one-half cents apiece for each and every fur-seal skin taken and shipped from said islands, and also to pay the sum of fifty cents per gallon for each gallon of oil sold by it, made from seals that may be taken on said islands during the said period of twenty years; and, to secure the prompt payment of the sixty thousand dollars rental above referred to, the said company agrees to deposit with the Secretary of the Treasury bonds of the United States to the amount of fifty thousand dollars, face value, to be held as a guaranty for the annual payment of said sixty thousand dollars rental, the interest thereon, when due, to be collected and paid to the North American Commercial Company, provided the said company is not in default of payment of any part of the said sixty thousand dollars rental."

"That it will furnish to the native inhabitants of said islands of St. George and St. Paul, annually, such quantity or number of dried salmon, and such quantity of salt and such number of salt barrels for preserving their necessary supply of meat, as the Secretary of the Treasury shall from time to time determine."

"That it will also furnish to the said inhabitants eighty tons of coal annually, and a sufficient number of comfortable dwellings in which said native inhabitants may reside, and

Page 171 U. S. 113

will keep said dwellings in proper repair, and will also provide and keep in repair such suitable school houses as may be necessary, and will establish and maintain during eight months of each year proper schools for the education of the children on said islands, the same to be taught by competent teachers, who shall be paid by the company a fair compensation, all to the satisfaction of the Secretary of the Treasury, and will also provide and maintain a suitable house for religious worship, and will also provide a competent physician or physicians, and necessary and proper medicines and medical supplies, and will also provide the necessaries of life for the widows and orphans and aged and infirm inhabitants of said islands, who are unable to provide for themselves; all of which foregoing agreements will be done and performed by the said company free of all costs and charges to said native inhabitants of said islands, or to the United States."

"The annual rental, together with all other payments to the United States provided for in this lease, shall be made and paid on or before the first day of April of each and every year during the existence of this lease, beginning with the first day of April, 1891."

"The said company further agrees to employ the native inhabitants of said islands to perform such labor upon the islands as they are fitted to perform, and to pay therefor a fair and just compensation, such as may be fixed by the Secretary of the Treasury, and also agrees to contribute, as far as in its power, all reasonable efforts to secure the comfort, health, education, and promote the morals and civilization of said native inhabitants."

"The said company also agrees faithfully to obey and abide by all rules and regulations that the Secretary o the Treasury has heretofore or may hereafter establish or make in pursuance of law concerning the taking of seals on said islands, and concerning the comfort, morals, and other interests of said inhabitants, and all matters pertaining to said islands, and the taking of seals within the possession of the United States. It also agrees to obey and abide by any restrictions or limitations upon the right to kill seals that the Secretary

Page 171 U. S. 114

of the Treasury shall judge necessary, under the law, for the preservation of the seal fisheries of the United States, and it agrees that it will not kill, or permit to be killed, so far as it can prevent, in any year, a greater number of seals than is authorized by the Secretary of the Treasury."

"The said company further agrees that it will not permit any of its agents to keep, sell, give, or dispose of any distilled spirits or spirituous liquors or opium on either of said islands, or the waters adjacent thereto, to any of the native inhabitants of said islands; such person not being a physician, and furnishing the same for use as a medicine."

"It is understood and agreed that the number of fur seals to be taken and killed for their skins upon said islands by the North American Commercial Company during the year ending May 1, 1891, shall not exceed sixty thousand."

"The Secretary of the Treasury reserves the right to terminate this lease, and all rights of the North American Commercial Company under the same at any time, on full and satisfactory proof that the said company has violated any of the provisions and agreements of this lease, or in any of the laws of the United States, or any Treasury regulation respecting the taking of fur seals, or concerning the islands of St. George and St. Paul, or the inhabitants thereof."

The circuit court made eighteen findings, including the following:

"Sixth. The said islands of St. George and St. Paul, in the Territory of Alaska, are the breeding ground of a herd of seals, which in the early spring moves northward to Behring Sea, and are the habitat of that herd during the summer and fall of each year; that the seals land in great numbers upon the said islands, and divide into families, each consisting of one male or bull, and many females or cows; that the young or male seals, or 'bachelors,' as they are called, are not admitted to the breeding ground, but are driven off by the older males, and oftentimes destroyed by them; that, until such bachelor seals arrive at the age of three or four years, they occupy other portions of the islands, and can be driven away from the breeding ground and killed without disturbing the seals

Page 171 U. S. 115

on the breeding grounds; that a large proportion of these young bachelor seals may be so killed without diminishing the birth rate of the herd, and their skins are a valuable article of commerce, and are more valuable than the skins of the females or older males; that, by protecting the females, and restricting the capture to the bachelors, the fisheries are capable of a permanent and annual supply of skins, which would afford a valuable source of revenue."

"Seventh. That, after the making of the said lease by the said plaintiff and the said defendant, the said defendant entered upon the enjoyment of the right thereby granted it; but, on account of the enforcement by the said plaintiff of the provisions of a convention or agreement made and entered into by the said plaintiff with the government of Great Britain, it prohibited and prevented the said defendant, during the years 1890, 1891, and 1892, from taking on the said islands as many seals as might have been taken without diminution of the herd, and far less in each year than the number mentioned in the said lease for the first year; the numbers taken in those years being in 1890, 20,995; in 1891, 13,482, and in 1892, 7,547."

"Eighth. That for the said years of 1890, 1891, and 1892, it was agreed between the Secretary of the Treasury and the said defendant that the said defendant should pay to the said plaintiff, for the seal skins taken by it on the said islands, the tax, and such proportionate part of the rental of $60,000 and the per capita sum of $7.62 1/2 as the number of seals taken bore to 100,000, except that for 1890 the per capita of $7.62 1/2 was not so reduced."

"Ninth. That by a convention or agreement with the government of Great Britain, commonly called the 'modus vivendi,' the United States promised, during the pendency of the arbitration between those two governments relating to the Behring Sea controversy, and the preservation of the seals resorting to those waters, to prohibit seal killing on the said islands in excess of 7,500, to be taken from the islands for the subsistence of the natives, and to use promptly its best efforts to insure the enforcement of the prohibition. "

Page 171 U. S. 116

"Tenth. That pursuant to such agreement, the United States prohibited and prevented the said defendant from taking any seals whatever from the said islands during the year 1893, and thus deprived the said defendant of the benefit of its said lease."

"Eleventh. That the Secretary of the Treasury did not exercise the discretion conferred upon him by section 1962 of the Revised Statutes, to limit the right of killing seals when necessary for the preservation of such seals, and did not so limit or restrict the right of the said defendant to take seals under its said lease for the year 1893, and that, during that year, it was not necessary, or even desirable, for the preservation of such seals, to limit the killing of the seals upon the said islands to the said number of 7,500 specified in the said modus vivendi."

"Twelfth. That in the year 1893, the United States government itself, through the agents of the Treasury Department, took upon the said islands 7,500 seals; that the said defendant was permitted to cooperate in selecting the seals so killed, and to take, and it did take and retain, the skins of those seals, and in this way, and in this way only, the defendant received those 7,500 skins."

"In accordance with the power reserved to him in said contract, the Secretary of the Treasury at the commencement of the seal-killing season for the year ending April 1, 1894, fixed the compensation of the natives upon the islands of St. Paul and St. George, to be paid to them by the defendant for killing the seals, sorting the skins, and loading them on board the defendant's steamer at 50 cents for each skin taken from the islands during the said season, and defendant paid to the natives said compensation, to-wit, the sum of $3,750."

"Thirteenth. That 20,000 bachelor seals could have been killed upon the said islands during the year 1893, in the customary way, without injury to, or diminution of, the herd, and the said defendant would have taken that number, had it been permitted so to do."

"Fourteenth. That if the said defendant had been allowed to and had taken in the year 1893, under its said lease, 20,000

Page 171 U. S. 117

seal skins, there would have been due to the said plaintiff the $60,000 rental, and for the per capita of $7.62 1/2, and the revenue tax of $2 per skin, the sum of $192,500, making together the sum of $252,500 (that is, $12.62 1/2 for each seal skin taken); that, for the 7,500 received by the said defendant, as above set forth, it owes to the said plaintiff the said sum of $12.62 1/2 apiece, amounting to the sum of $94,687.50."

"Fifteenth. The defendant could have sold 12,500 more seal skins, if it had been allowed to take the same on the said islands during the year 1893 at the average market price of $24 for each skin; which for the said number of 12,500, which it might have taken, but was prevented from taking by the act of the government of the United States, would amount to $300,000; that for such 12,500 seal skins the said defendant would have been liable to pay, according to the terms of its lease if it had taken 20,000 seal skins during that year, the sum of $12.62 1/2 each, amounting to $157,812.50, which, being deducted from the price at which such skins could have been sold, namely, $300,000, leaves as the net loss sustained by the said defendant in consequence of the breach of its said lease by the said plaintiff, the sum of $142,187.50, which is due and owing to the said defendant by the said plaintiff, and that its claim therefor would be a proper matter of counterclaim or credit in this action if the conditions prescribed by section 951 of the United States Revised Statutes had been complied with by the said defendant."

"Eighteenth. The defendant did not present to the accounting officers of the Treasury, for their examination, any claim for damages by reason of the losses alleged to have been incurred by the defendant by reason of the action of the United States in entering into the said convention or modus vivendi with Great Britain, and limiting the catch of seals upon the said islands to 7,500, and such claim was not disallowed by the accounting officers of the Treasury in whole or in part, and it was

Page 171 U. S. 118

not proved to the satisfaction of the court that the defendant was at the time of the trial of this action in possession of vouchers not before in its power to procure, or that the defendant was prevented from exhibiting its said alleged claim at the Treasury by absence from the United States, or by unavoidable accident."

The circuit court made these conclusions of law:

"First. That the said defendant, having received the said 7,500 seal skins taken from the said islands during the year 1893, is liable to pay the said plaintiff therefor the said sum of $94,687.50, with interest thereon from the first day of April, 1894, and the said plaintiff is entitled to recover in this action said sum, with interest as aforesaid, from the said defendant."

"Second. That by reason of the breach of the said lease by the said plaintiff, prohibiting the said defendant from taking any seal skins during the year 1893, the said plaintiff is liable to the said defendant for the said sum of $142,187.50, with interest thereon from the first day of December, 1894."

"That on account of the same claim of the said defendant against the said plaintiff for damages for breach of the said lease not having been presented to, and disallowed by, the accounting officers of the Treasury, it cannot be allowed as a counterclaim or credit in this action, and the said counterclaim is therefore dismissed, but not on the merits thereof, and without prejudice to the right of the said defendant to enforce the same by any other proper legal proceeding."


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