considered in no other light than as auxiliaries of the government." United Sates v. Railroad Co., 17 Wall. 328. Being intended as agencies in the administration of civil government they are regarded as public and partaking of the nature of municipal corporations in their incidents. Being purely creatures of legislative enactments they owe their creation to the particular statute which gives them their existence; this statute, together with the general provisions of law applicable to them, confers upon them the powers they possess, and like other municipal corporations, imposes upon them certain public duties which they owe to the State in the administration of the local government. Likewise, towns are public corporations, created for similar public purposes in the due administration of the government of the State. As incident to their existence and the objects of their creation they are allowed to purchase or build town-houses, school-houses, poor-houses and police stations, these being the "recognized functions of government," and as such exempted by implication from the general provisions of the statute in relation to taxation as property appropriated to public uses. Worcester v. Western Railroad, 4 Mete. 567; Wayland v. County Commissioners, 4 Gray, 501; Worcester County v. Worcester, 116 Mass. 193; Portland v. Water Company, 67 Me. 137; Boston & Maine Railroad v. Cambridge, 8 Cush. 239.

This doctrine is thus laid down by a learned writer and juristDillon Mun. Corp. (2d ed.), § 614: "The general statutes of the State upon the subject of taxing property undoubtedly refer to private property and not to that owned by the State; and in view of the public nature of municipalities and the purposes for which they are established, heretofore explained, the author is of opinion that such enactments do not by implication extend to any property owned by them-certainly to none owned by them for public uses." In accordance with these views the court of appeals in Kentucky, in the case of Louisville v. Commonwealth, 1 Duvall, 295, held that whatever property was used and held by the city for carrying on its municipal government, or was necessary or useful for that purpose, was not taxable by the State, and this would include public buildings, prisons and property dedicated to charity.

The courts of other States furnish ample authority in support of exempting, by implication from taxation, property of the character above named. People v. Doe, 36 Cal. 222, was a case where a writ of assistance was asked by the plaintiff to put him in possession of land which he claimed to have acquired by tax title, being a portion of the city cemetery in the city of Sacramento. The court denied the writ as to that on the ground that the land was public property and, therefore, not taxable.

SANDERSON, J., said: "The Constitution and laws upon the subject of taxing property are, therefore, to be understood as referring to private property and persons and not including public property and the State, or any subordinate part of the State government, such as counties, towns and municipal corporations."

Speaking of the South Park commissioners as a corporation and of the park property, BREESE, Ch. J., in People v. Salomon, 51 Ill. 52,

says:

"But holding it, they hold it as a public corporation for public purposes, and was it ever heard that the property, real or personal, of a public inunicipal corporation was subject to taxation?" And Pennsylvania maintains the same doctrine.

"No exemption law is needed for any public property held as such." Directors of Poor v. School Directors, 42 Penn. St. 25.

To entitle it to exemption, however, it must be public in its nature. There is a distinction between property held and owned for profit by a municipal corporation like a private individual, charged with no public trust or use, which is private in its nature, and that which it holds in general or special trust for purposes germane to the objects of the corporation. In the former case it is the legitimate subject of taxation, and no reason exists why it should be exempt from the general rule; while in the latter case, such property forming a part of the means and instrumentalities of the corporation called into use in the administration of government, is held to be exempt from taxation upon principle as well as upon authority. Taxation is a sovereign right, essential to the existence of government, and as a rule attaching upon all property within the jurisdiction of the State. But in our system of government, both State and National, there are limitations as well as exceptions to the rule. The Federal government cannot tax the public means and instrumentalities of the State, nor the State the public means and instrumentalities of the National government, so as to interfere or impair their efficiency in performing the functions by which they are designed to serve that government. Nat. Bank v. Commonwealth, 9 Wall. 362; Thomson v. Pacific Railroad, id. 591; Burrough Tax. 505. There is no express constitutional prohibition upon the State against taxing the means and instrumentalities of the general government, but it is held to be prohibited by necessary implication. Collector v. Day, 11 Wall. 123. Court-houses, jails, townhouses, school-houses, poor-houses and other buildings appropriated to public uses, owned by municipal corporations, and incident to such corporations, are but the means and instrumentalities used for municipal and governmental purposes, and are therefore exempt from general taxation, not by express statutory prohibition, but, as we have seen, by necessary implication. Hence, it has been held, upon principles quite analogous, that public property is by implication exempted from lien statutes as much as from general tax laws, and for the same reasons. Foster v. Towler, 60 Penn. St. 27; Frank v. Freeholders, 39 N. J. L. 347; Board of Education v. Neidenberger, 78 Ill. 58; Bouton v. McDonough Co., 84 id. 384; Loring v. Small, 50 Iowa, 271. The consequences of either process might result in a sale of the property for the purposes of enforcing the claim, thereby destroying its public character. In Frank v. Freeholders, supra, the court say that, when the buildings are those of a municipal corporation, a fundamental rule of public policy compels the courts to arrest the proceedings before the buildings are touched." It is said that "the power to tax involves the power to destroy, and the power to destroy might defeat and render useless the power to create." 1 Kent Com.

426.

Consequently, if the implied exemption exists as between the State and the public buildings or property of the town or city created by its own legislature, a fortiori the town cannot tax the public means and instrumentalities of a village corporation, an auxiliary of the State, deriving its existence from the same legislative source.

The charter of the defendant corporation, when examined, will be found to contain many of those incidents of a public character usually pertaining to other municipal corporations; among which this corporation is authorized and vested with power to raise money to defray the expenses of a night watch, a police force, a fire department, and all other necessary measures for the better security of life and property, and for the promotion of good order and quiet within its limits. Thus the powers with which it is invested, and the objects for which it was created, are similar, in many respects, to those which belong to towns, cities, and other municipal corporations. In addition to the powers and privileges above enumerated, bestowed upon this corporation, express authority is given by the sovereign power of the State to erect this hall And from a careful examination of the facts in the case, and in view of the public nature of this corporation and the purposes for which it was created, we are led to no other conclusion than that this building, authorized by legislative sanction, is owned by the corporation for public uses, rather than in its "social or commercial capacity." The letting of those parts of the building which are not in actual use by the corporation are incidental and subsidiary to the objects for which it was created, and do not take away its character as a public building, or render it liable to taxation by the town as it would be were this a private corporation and its building erected for private purposes. Many city and town halls in this State are so constructed that when not in use for strictly municipal purposes, they may be let for any proper use. Such fitting up and letting for hire are the incidents and not the primary objects of such public buildings. The authorities to which our attention has been called by the learned counsel for the plaintiffs, upon examination, will be found to apply to property owned not by public municipal corporations and appropriated to public uses, but by private corporations or associations, and where express statutory exemption was claimed. In such cases of express exemption, statutes are to be construed with strictness, and the exemption should be denied unless so clearly granted, as to be free from doubt. Dill. Mun. Corp., § 616.

In accordance with the stipulation in the report of the case, the entry must be, plaintiff's nonsuit.

PETERS,

curred.

Ch. J., WALTON, DANFORTH, LIBBEY and EMERY, JJ., con

BURRILL v. Daggett.

December 1, 1885.

DAMAGES LIQUIDATED OR PENALTY.

Whether or not the penal sum named in a bond conditioned that the obligor will not engage in a particular business in a place named is to be regarded as liquidated damages in case of a breach, depends upon the intention of the parties. That intention, if not expressed in words, is to be ascertained by an examination of the whole instrument; its subject-matter, the difficulty in ascertaining the actual damages, and the relation which the stipulated sum bears to the probable damages for a breach. (See note, p. 32.)

Action on a bond. The opinion states the case.

Potter & Lancaster, for plaintiff. Brown & Carver, for defendant. FOSTER, J. On the day of the date of the bond in suit, the defendant sold to the plaintiff, his barber shop, tools, fixtures, furniture, stock and good-will of trade in said shop, for the sum of $300. As a part of the consideration of the purchase, he gave the plaintiff the bond in suit in the penal sum of $500, conditioned among other things, never to open and keep a barber shop in the town of Fairfield. Nearly two years after the sale and the giving of this bond, the defendant bought. out a barber shop in an adjoining building, and since that time has continued the business of barbering, working at the barber's trade in said shop.

The only questions in controversy are whether there has been a breach of this bond, and if there has been, whether the same sum mentioned is to be regarded as a penalty, or as liquidated damages.

The plaintiff contends that there has been a breach of the bond, and that he is entitled to recover the above-named sum of $500 as liquidated damages. The defendant denies that there has been any such breach, and claims that his purchase of another barber shop, which was in operation at the time, and his continuation of the barbering business therein, working himself at his trade, is not opening and keeping a barber shop, and therefore not within the engagement.

We are not inclined to adopt the defendant's view of this question. Although there may not have been more than two other shops of the kind in the village, as the case shows, at the time the defendant sold to the plaintiff, it may well be inferred that it was the understanding of the parties, from the language of the bond, viewed in the light of the attendant circumstances as disclosed in the case, that the defendant was not again to engage in the business by keeping a barber shop. He sold to the plaintiff not only his shop, tools, etc., but also his good-will in the business. It was against the competition of the defendant that the plaintiff intended to provide; and whether the defendant bought out or kept another barber shop, or opened and kept one independently of any in operation at the time, still continuing the business and working at his trade, it would be a violation of the condition of the bond.

The remaining question then is, whether the $500 shall be regarded as liquidated damages, or only security for the damages actually sustained. And whether the sum named in instruments of this nature is to be regarded as penalty or liquidated damages, is not always free

from difficulty. It must rest, however, upon the construction to be given to the language used, and there are certain principles that may be resorted to in most cases to aid in determining this question.

The bond is in the usual form, and the general rule and preference of the law in such cases is, that the penal sum therein named is to be regarded as a penalty and not as liquidated damages. Smith v. Wedg wood, 74 Me. 459; Cushing v. Drew, 97 Mass. 446; Henry v. Davis, 123 id. 346. Yet courts endeavor to learn the real intent of the parties to the contract, and if that can be ascertained, will be governed by it. "It is always a question of construction on which, as in other cases where the meaning of the parties in a contract provable by a written instrument arises, the court may take some aid to themselves from circumstances extraneous to the writing. In order to determine upon the words used, there may be an inquiry into the subject-matter of the contract, the situation of the parties, the usages to which they may be understood to refer, as well as other facts and circumstances of their contract." Perkins v. Lyman, 11 Mass. 81. This is not done for the purpose of modifying or controlling the language used, but the more clearly to interpret the true meaning of the language, aided by the circumstances that gave birth to it. To determine whether the sum named is intended as a penalty or as liquidated damages, the court in Pennsylvania, in Sleeper v. Williams, 48 Penn. St. 454, say that it is necessary to look at the whole instrument, its subject-matter, the ease or difficulty in measuring the breach in damages, and the magnitude of the stipulated sum, not only as compared with the value of the subject of the contract, but in proportion to the probable consequences of the breach.

In accordance with these principles our own court in the case of Holbrook v. Tobey, 66 Me. 414, has adhered to the same doctrine. Mr. Justice WALTON, after stating that if a party binds himself in a certain sum not to carry on any particular kind of business within a certain territory, or within a certain time, the sum mentioned will, in general, be regarded as liquidated damages, says: "Of course, if the sum named should be out of all proportion to any possible damage which the plaintiff could sustain, the court would hold otherwise, upon the very reasonable presumption that the parties never could have intended that the sum named should be regarded as liquidated damages." In the case at bar, there is no express agreement in the bond that the sum named shall be regarded as liquidated damages. Nor are we able to find any thing in the language of the bond, the subject-matter of the contract, or the nature of the case, that would justify a conclusion that this sum was intended by the parties to be the stipulated and ascertained damages in case of a breach. We may properly consider the fact that the parties were negotiating in reference to a business of

not

very great magnitude, and that the whole consideration paid for

the subject-matter of the purchase, was much less than the sum named in the bond. And when we further take into consideration the situation of the parties, as well as the proportion that this sum bears to the than that it was the intention of the parties that the sum named, should probable consequences of a breach, we can arrive at no other conclusion