Maryland v. Baltimore & Ohio Railroad Company
44 U.S. 534 (1845)

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U.S. Supreme Court

Maryland v. Baltimore & Ohio Railroad Company, 44 U.S. 3 How. 534 534 (1845)

Maryland v. Baltimore & Ohio Railroad Company

44 U.S. (3 How.) 534

ERROR TO THE COURT OF APPEALS

FOR THE WESTERN SHORE OF MARYLAND

Syllabus

The State of Maryland, in 1886, passed a law directing a subscription of $3,000,000 to be made to the capital stock of the Baltimore & Ohio Railroad Company, with the following proviso,

"That if the said company shall not locate the said road in the manner provided for in this act, then and in that case they shall forfeit $1,000,000 to the State of Maryland for the use of Washington County."

In March, 1841, the state passed another act repealing so much of the prior act as made it the duty of the company to construct the road by the route therein prescribed, remitting and releasing the penalty, and directing the discontinuance of any suit brought to recover the same.

The proviso was a measure of state policy which it had a right to change if the policy was afterwards discovered to be erroneous, and neither the commissioners nor the county nor any one of its citizens acquired any separate or private interest under it which could be maintained in a court of justice.

Page 44 U. S. 535

It was a penalty inflicted upon the company as a punishment for disobeying the law, and the assent of the company to it as a supplemental charter is not sufficient to deprive it of the character of a penalty.

A clause of forfeiture in a law is to be construed differently from a similar clause in an engagement between individuals. A legislature can impose it as a punishment, but individuals can only make it a matter of contract.

Being a penalty imposed by law, the legislature had a right to remit it.

The facts were these:

On 4 June, 1836, Laws of Maryland, 1835, chap. 395, the Legislature of Maryland passed an act entitled "An act for the promotion of internal improvement," by which subscriptions were directed to be made, on certain terms, to the capital stock of the Chesapeake & Ohio Canal Company and Baltimore & Ohio Railroad Company, to the amount of $3,000,000 to each company. The conduct of the canal company having no bearing upon the question involved in the present suit, it is not necessary to notice any further the parts of the law which related to it.

A part of the 5th section of the act was as follows:

"And the said treasurer shall not make any payment aforesaid for subscription to the stock of the Baltimore & Ohio Railroad Company until after a majority of the directors appointed therein on behalf of this state shall have certified to the treasurer in writing, supported by the oath or affirmation of a majority of said directors, that they sincerely believe in their certificate and statement that, with the subscription by this act authorized to be made to said company's stock, and with the subscription which the City of Baltimore may have made by virtue of an act, passed at December session of the year eighteen hundred and thirty-five of this assembly, or that independently of any subscription by any other public authority than the City of Baltimore, as aforesaid, and of the Cities of Pittsburgh and Wheeling, and exclusive of any loan secured to it, exclusive of all future profits and debts due by the company on interest, the said railroad company in their opinion have funds sufficient to complete the said railroad from the Ohio River, by way of and through Cumberland, Hagerstown, and Boonsborough to its present track near to Harper's Ferry, and it is hereby declared to be and made the duty of the said company to, and they shall so locate and construct the said road as to pass through each of said places, which certificate of said directors shall be accompanied by an estimate or estimates of one or more skillful and competent engineers, made out after a particular and minute survey of the route of said road by him or them and verified by his or their affidavit, showing that the whole cost of said work will not be greater than the amount of funds the said directors shall certify to have been received by said

Page 44 U. S. 536

company, and applicable to the construction of the said road, provided that if the said Baltimore & Ohio Railroad Company shall not locate the said road in the manner provided for in this act, then and in that case they shall forfeit one million of dollars to the State of Maryland for the use of Washington County."

This act was accepted by the railroad company in a general meeting of stockholders, and information thereof communicated to the governor on 26 July, 1836.

On 24 September, 1836, the treasurer made his subscription of $3,000,000 to the capital stock of the company.

On 1 October, 1838, a majority of directors on behalf of the state gave the certificate and statement required by the act.

The railroad company having finally located, and being in the act of constructing their road without the limits of Washington County, within which Hagerstown and Boonsborough are situated, a suit was brought in Frederick County, Maryland, in February, 1841, in the name of the State of Maryland for the use of Washington County against the railroad company in an action of debt to recover $1,000,000.

In March, 1841, the Legislature of Maryland passed an act in which they say

"That so much of the 5th section of the act of 1835 as makes it the duty of the Baltimore & Ohio Railroad Company to construct the said road so as to pass through Hagerstown and Boonsborough be and the same is hereby repealed, and that the forfeiture of one million of dollars reserved to the State of Maryland as a penalty in case the said Baltimore & Ohio Railroad Company shall not locate the said road in the manner provided for in that act, be and the same is hereby remitted and released and any suit instituted to recover the same sum of one million of dollars or any part thereof be and the same is hereby declared to be discontinued and of no effect."

In October, 1841, the defendant pleaded the general issue and set forth the above act.

In February, 1842, the case came on for trial upon the following agreed statement of facts:

"It is admitted in this case that the Commissioners of Washington County, the parties at whose instance this action was instituted for the use of Washington County, were at the time of institution of this suit and still are a body corporate, duly elected and organized under and by virtue of the Act of Assembly of Maryland of 1829, chap. 21, and its supplementary acts. It is also admitted that the defendants are and were at the institution of this suit a body corporate duly existing under and by virtue of the Act of Assembly of Maryland of 1826, chap. 123, and its supplementary acts. It is also admitted that this suit is brought at the instance of said Commissioners of Washington County to recover, for the use of said county, the $1,000,000 which they allege to be forfeited to the said

Page 44 U. S. 537

state for the use of said county under the provisions of the 5th section of the Act of 1835, chap. 395, and it is admitted that the said defendants have not and had not at the institution of this suit constructed or located their road from the Ohio River, by way of and through Hagerstown and Boonsborough, to the track of said road at Harper's Ferry, as the same existed at the time of the passage of the said Act of 1835, chap. 395, but, on the contrary, had at the institution of this suit finally located, and are, were then, and are now constructing their said road by a different route, and without the limits of Washington County, within which the said Hagerstown and Boonsborough are situated. It is admitted that the said Baltimore & Ohio Railroad Company, in general meeting of the said corporation, did accept, assent, and agree to the several provisions of the said Act of 1835, chap. 395, and did duly communicate their said approval, assent, and agreement, under their corporate seal and the signature of their president, to the governor of this state, in the manner and within the time prescribed by the said act, which approval, assent, and agreement, together with the report of the engineer of the said railroad company, which was required by the said act to accompany the same, were as follows, viz.:"

The statement then set out all these documents in extenso. The engineer framed his estimates for a road to Pittsburgh which would cost $6,681,468. That part of it passing through Washington County is thus described.

"The route departs from the Baltimore & Ohio Railroad at the mouth of the Little Catoctin, ascends that stream to the eastern base of the Blue Ridge or South Mountain, and thence continues to ascend along its slope to a depression in its crest, called 'Crampton's Gap,' thence passing through the mountain by a tunnel of 1,500 feet in length, it descends into 'Pleasant Valley,' lying between the South mountain and the Elk Mountain, and proceeds along the western base of the former to and through the Town of Boonsborough, thence to a point near the Village of Funkstown, and thence across the Antietam Creek, above the Turnpike Bridge, to the Borough of Hagerstown; thence through the streets of that town and over Salesbury Ridge to and across the Conocochegue Creek, about two miles north of Williamsport, thence"

&c.

"It is also admitted that after this suit was instituted for the purpose of recovering the said forfeiture of million of dollars, the Legislature of Maryland, on 10 March, 1841, passed the Act of December session 1840, chap. 260, repealing the said 5th section of the said Act of 1835, chap. 395, as far as relates to the said forfeiture of a million of dollars, and releasing the said defendants from the said forfeiture and every part thereof and directing any suit instituted to recover the same to be discontinued, and to

Page 44 U. S. 538

have no effect. It is also admitted that the said repealing Act of 1840, chap. 260, was passed upon the following memorial of the said defendants to the legislature and that at the time of passing the same there was then before the legislature a countermemorial upon the said subject from the said Commissioners of Washington County, which memorial and countermemorial, it is agreed, were as follows, to-wit:"

"[These documents are too long to be inserted.]"

"It is further admitted and agreed that the several acts of assembly herein particularly referred to, as well as any other acts or resolutions of the General Assembly of Maryland, that either party may deem applicable in the argument of this case, either in the county court, or Court of Appeals or Supreme Court of the United States, should the case be hereafter carried by either party to said courts or either of them, shall be read from the printed statute books and have the same effect and operation in the case as if duly authenticated copies thereof were made a part of these statements."

"It is further agreed that all errors of pleading and of form in any part of the proceedings of either party in this case are waived, it being the object and understanding of the parties that the matters of right in controversy between them shall be fairly and fully presented to all or either of the said courts in which the same may be pending, and that either of the said parties shall have his pleading and proceedings considered as being as perfect as they could be made to give him the benefit of the case here stated. It is admitted that this suit was the only suit ever brought by the said commissioners or at their instance to recover the said forfeiture of a million of dollars, and was pending when the said Act of 1835, chap. 395, was passed. Upon this statement it is further agreed that if the court shall be of opinion that this action could not be maintained if the said repealing act of 1840, chap. 260, had not been passed, or that the operation and effect of that repealing act is to release the said forfeiture of $1,000,000, and to discontinue and put an end to this suit, then judgment to be entered for the defendants, otherwise such judgment is to be entered for the plaintiffs as the court may think right and proper. It is further agreed that the county court shall enter judgment pro forma for the defendants. The plaintiff to have the same right to take up the case by appeal or writ of error, to the Court of Appeals, or ultimately to the Supreme Court of the United States, as if the judgment in the county court had been rendered upon demurrer, or upon a bill of exceptions taken in due and legal form upon the facts hereinbefore agreed upon."

Upon this statement of facts, the Court of Frederick County gave judgment for the defendant, and the case being carried to the Court of Appeals, the judgment below was affirmed.

The writ of error was brought to review this judgment.

Page 44 U. S. 548

MR. CHIEF JUSTICE TANEY delivered the opinion of the Court.

The question brought before the Court by this writ of error depends upon the construction and effect of an act of the General Assembly of Maryland, passed at December session, 1835, entitled "An act for the promotion of internal improvement."

The original charter of the Baltimore & Ohio Railroad Company authorized it to construct a railroad from Baltimore to some suitable point on the Ohio River without prescribing any particular route over which the road was to pass, leaving the whole line to the judgment and discretion of the company. But by the act above mentioned, the state proposed to subscribe $3,000,000 to its capital stock provided the company assented to the provisions of that law, and, among other provisions, this act of assembly required the road to pass through Cumberland, Hagerstown, and Boonsborough and provided also that if the road was not located in the manner therein

Page 44 U. S. 549

pointed out, the company "should forfeit $1,000,000 to the state for the use of Washington County."

The Towns of Cumberland, Hagerstown, and Boonsborough are all situated in Maryland; the first in Alleghany County and the two latter in Washington.

This law was assented to by the company and became obligatory upon it, and the sum proposed was subscribed by the state, but for reasons which it is not necessary here to mention the company did not locate the road through Hagerstown or Boonsborough, nor pass through any part of Washington on its way from Harper's Ferry to Cumberland, to which point the road has been made, and this suit was thereupon brought at the instance of the Commissioners of Washington County, in the name of the state for the use of the county, to recover the $1,000,000 above mentioned. After the suit had been instituted, the state, at December session, 1840, passed a law repealing so much of the act of 1835 as required the company to locate the road through Hagerstown and Boonsborough and remitting the forfeiture of the $1,000,000, and directing any suit instituted to recover it to be discontinued.

The Commissioners of Washington County, however, at whose instance the action was brought, insisted that the money was due to the county by contract, and that it was not in the power of the state to release it, and upon that ground continued to prosecute the suit, and the court of appeals of the state having decided against the claim, the case is brought here by writ of error.

Undoubtedly if the money was due to Washington County by contract, the act of 1840, which altogether takes away the remedy, would be inoperative and void. But even if the provisions upon this subject in the act of 1835 could be regarded as a contract with the railroad company, it would be difficult to maintain that the county was a party to the agreement or that it acquired any private or separate interest under it distinct from that of the state. It was certainly at that time the policy of the state to require the road to pass through the places mentioned in the law, and if it failed to do so to appropriate the forfeiture to the use of the county. But it cannot be presumed that in making this appropriation the legislature was governed merely by a desire to advance the interest of a single county, without any reference to the interests of the rest of the state. On the contrary, the whole scope of the law shows that it was legislating for state purposes, making large appropriations for improvements in different places, and if the policy which at that time induced it to prescribe a particular course for the road and in case it was not followed to exact from the company $1,000,000 and devote it to the use of Washington County was afterwards discovered to be a mistaken one, and likely to prove highly injurious to the rest of the state, it had unquestionably the power to change its policy and allow the company to pursue a different course, and to

Page 44 U. S. 550

release it from its obligations both as to the direction of the road and the payment of the money. For in doing this it was dealing altogether with matters of public concern and interfered with no private right, for neither the commissioners nor the county nor any one of its citizens had acquired any separate or private interests which could be maintained in a court of justice.

As relates to the commissioners, they are not named in the law, nor were they in any shape parties to the contract supposed to have been made, nor is the money declared to be for their use. They are a corporate body, it is true, and the members who compose it are chosen by the people of the county. But like similar corporations in every other county in the state, it is created for the purposes of government, and clothed with certain defined and limited powers to enable it to perform those public duties which, according to the laws and usages of the state, are always entrusted to local county tribunals. Formerly they were appointed in all of the counties annually by the executive department of the government, and were then denominated the levy court of the county, and in some of the counties they are still constituted in that manner, the legislature commonly retaining the old mode of appointment or directing an election by the people, as the citizens of any particular county may prefer. But however chosen, their powers and duties depend upon the will of the legislature, and are modified and changed and the manner of their appointment regulated at the pleasure of the state. And if this money had been received from the railroad company, the commissioners, in their corporate capacity, would not have been entitled to it, and could neither have received nor disbursed it, nor have directed the uses to which it should be applied, unless the state had seen fit to enlarge their powers and commit the money to their care. If it was applied to the use of the county, it did not by any means follow that it was to pass through their hands, and the mode of application would have depended altogether upon the will of the state. This corporation therefore certainly had no private corporate interest in the money, and indeed the suit is not entered for their use, but for the use of the county. The claim for the county is equally untenable with that of the commissioners. The several counties are nothing more than certain portions of territory into which the state is divided for the more convenient exercise of the powers of government. They form together one political body in which the sovereignty resides. And in passing the law of 1835, the people of Washington County did not and could not act as a community having separate and distinct interests of their own, but as a portion of the sovereignty, their delegates to the general assembly acting in conjunction with the delegates from every other part of the state, and legislating for public and state purposes, and the validity of the law did not depend upon their assent to its provisions, as it would have been equally obligatory upon them if

Page 44 U. S. 551

every one of their delegates had voted against it, provided it was passed by a constitutional majority of the general assembly. And whether the money was due by contract or otherwise, it must, if received and applied to the use of the county, have yet been received and applied by the state to public purposes in the county. For the county has no separate and corporate organization by which it could receive the money or designate agents to receive it or give an acquittance to the railroad company or determine upon the uses to which it should be appropriated. We have already seen that the corporation of commissioners of the county had no such power, and certainly no citizen of the county had any private and individual property in it. It must have rested with the state so to dispose of it as to promote the general interest of the whole community by the advantages it bestowed upon this particular portion of it.

Indeed, if this money is to be considered as due either to the commissioners or to the county by contract with the railroad company, so that it may be recovered in this suit in opposition to the will and policy of the state, it would follow necessarily that it might have been released by the party entitled, even if the state had desired to enforce it. And if the state had adhered to the policy of the act in question, and supposed it to be for the public interest to insist that the road should pass along the line prescribed in that law, or the company be compelled to pay the million of dollars according to the construction now contended for, the commissioners or the county might have counteracted the wishes of the state and, by releasing the company from the obligation to pay this money, allowed them to locate the road upon any other line. And if the construction of the plaintiff in error be right, the Legislature of Maryland, in a case where the whole people of the state had become so deeply concerned by the large amount subscribed to the capital stock of the road that its success or failure must seriously affect the interests of every part of the state, and where the improvement was regarded as of the highest importance to its general commercial prosperity, it deliberately deprived itself of the power of exercising any future control over it and left it to a single county or county corporation to decide upon the course of the road, and either to insist on the line prescribed by the legislature or to release the company from the obligation to pursue it, without regard to the wishes or interest of the rest of the state. Whether the million of dollars was reserved by contract or inflicted as a penalty, such a construction of the law cannot be maintained.

But we think it very clear that this was a penalty, to be inflicted if the railroad company did not follow the line pointed out in the law. It is true that the act of 1835, which changed in some important particulars the obligations imposed by the original charter, would not have been binding on the company without its consent, and the 1st section therefore contains a provision requiring the

Page 44 U. S. 552

consent of the company in order to give it validity. And when the company assented to the proposed alterations in their charter, and agreed to accept the law, it undoubtedly became a contract between it and the state; but it was a contract in no other sense than every charter, whether original or supplementary, is a contract, where rights of private property are acquired under it. Yet although this supplementary charter was a contract in this sense of the term, it does not by any means follow that the legislature might not, in the charter, impose duties and obligations upon the company and inflict penalties and forfeitures as a punishment for its disobedience which might be enforced against it in the form of criminal proceedings and as the punishment of an offense against the law. Such penal provisions are to be found in many charters, and we are not aware of any case in which they have been held to be mere matters of contract. And in the case before the Court, the language of the law requiring the company to locate the road so as to pass through the places therein mentioned is certainly not the language of contract, but is evidently mandatory and in the exercise of legislative power, and it is made the duty of the company, in case they assent to the provisions of that law, to pass through Cumberland, Hagerstown, and Boonsborough, and if they fail to do so, the fine of $1,000,000 is imposed as a punishment for the offense. And a provision, as in this case, that the party shall forfeit a particular sum, in case he does not perform an act required by law, has always, in the construction of statutes, been regarded not as a contract with the delinquent party, but as the punishment for an offense. Undoubtedly, in the case of individuals, the word "forfeit" is construed to be the language of contract, because contract is the only mode in which one person can become liable to pay a penalty to another for a breach of duty or the failure to perform an obligation. In legislative proceedings, however, the construction is otherwise, and a forfeiture is always to be regarded as a punishment inflicted for a violation of some duty enjoined upon the party by law, and such very clearly is the meaning of the word in the act in question.

In this aspect of the case and upon this construction of the act of assembly, we do not understand that the right of the state to release it is disputed. Certainly the power to do so is too well settled to admit of controversy. The repeal of the law imposing the penalty is of itself a remission. 5 U. S. 1 Cranch 104; 9 U. S. 5 Cranch 281; 10 U. S. 6 Cranch 203, 10 U. S. 329. And in the case of United States v. Morris, 10 Wheat. 287, this Court held that Congress had clearly the power to authorize the Secretary of the Treasury to remit any penalty or forfeiture incurred by the breach of the revenue laws, either before or after judgment, and if remitted before the money was actually paid, it embraced the shares given by law in such cases to the officers of the customs, as well as the share of the United States. The right to remit a penalty like this stands upon the same principles.

Page 44 U. S. 553

We are therefore of opinion that the law of 1840 hereinbefore mentioned did not impair the obligation of a contract, and that the judgment of the Court of Appeals of Maryland must be

Affirmed.

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