State v. Baltimore & Ohio Railroad

Bartol, C. J., delivered the opinion of the Court. The questions presented by this appeal are of very great interest and importance; more on account of the character of the parties, and the large amount of money involved, than by reason of any intrinsic difficulty in the questions themselves. These depend for their solution upon plain and íamiliár principles of law, which are not affected in their application either by the amount in controversy or the dignity and power of the parties litigant. The action is indebitatus assumpsit, instituted by the appellant against the appellee on the 6th day of May, 1870.

The declaration contains a count “ for money had and received by the defendant for the use of the plaintiff.” In answer to the defendant’s demand for a bill of particulars, the plaintiff’s claim was stated to be “ for five hundred ³⁶⁰ thousand dollars, ($500,000,) being the one-fifth part of the whole amount of moneys received .by the defendant for the transportation of passengers upon the "Washington branch of the Baltimore and Ohio Railroad, from the 1st day of January, 1860, to the 1st day of January, 1870; which said sum of $500,000 was received by the defendant for the use of the plaintiff, and was due and in arrears to the plaintiff at the time of the institution of this action.” The defendants plead “that they never were indebted as alleged by the plaintiff’,” and also filed a plea of set-off. To this second plea there was a demurrer, which was sustained by the Court below. Issue being joined on the first plea, a verdict was rendered in favor of the defendant under the instructions of the Superior Court, and from the judgment thereon this appeal has been taken. It appeal's from the bill of exceptions that the plaintiff offered in evidence the Acts of the General Assembly of Maryland, containing the charter of tl;e defendant, all the Acts of Assembly relating to the construction of a railroad between the cities of Washington and Baltimore, and to the payment to the plaintiff by the defendant of one-fifth part of the whole amount which may be received by it from the transportation of passengers on the said branch road, and all other Acts applicable in the premises; that these A'cts were accepted, by the defendant, and the branch road completed and put in operation under them in the year 1835.

Also offered in evidence statements made from the books of the defendant, showing the whole amount of money so received by the defendant for the transportation of passengers, and the portion thereof paid to the State on account of said one-fifth, during the period covered by the bill of particulars, showing an apparent balance unpaid on the 1st day of January, 1870, of $316,871.43. Evidence was then offered showing that the fare charged and received from passengers on the branch road during the Avhole period of time covered by the bill of particulars, Avas $1.50 for each passenger betAveen- Washington ³⁶¹ and Baltimore, and at the same rate for shorter distances; and that from the time of the completion of the branch road down to the 1st day of January, 1868, the defendant had annually rendered an account purporting to show the gross amount received for the transportation of passengers, and the State’s proportion thereof; and had made semi-annual payments in January and July in each year on account of the same, to the Treasurer of Maryland, down to the 1st day of July, 1868. After the testimony on the part of the plaintiff had been closed, two prayers were offered on the part of the defendant, stating substantially: 1st. That the several Acts of Assembly, so far as they provide for the payment by the defendant to the treasurer for the use of the State, of one-fifth of the money received for the transportation of passengers on the branch road, are unconstitutional, because in conflict with the Constitution of the United States. 2d.

That the defendants are not estopped from denying the constitutionality of said Acts, by reason of their having charged and received $1.50 for the transportation of each passenger for the whole distance over the branch road, and accounted with and paid to the treasurer one-fifth of the gross receipts from passengers on said road up to the 30th day of June, 1868, and that the plaintiff' was not entitled to recover. These prayers were granted by the Superior Court. It thus appears that the defence to the action rests entirely upon the alleged ground that the several Acts of Assembly, whereby the obligation was assumed by the company to pay to the State Treasurer, the one-fifth of the gross amount received from the passenger fare on the railroad, are inoperative, because in conflict with the Constitution of the United Slates. The argument urged in suppoit of this position is that the operation and effect of such a contract between the company and the State is to impose a capitation tax upon passengers, ³⁶² to the amount of one-fifth of the railroad fare charged by the company; which, to that extent, is a tax upon the right of citizens to travel through the State, and is a violation of the Constitutional rights of the citizen under the decision of the Supreme Court in Crandall vs. Nevada, 6 Wallace, 35.

This Constitutional question has been fully argued, and has received the consideration by this Court which its importance demands; and .before concluding this opinion we propose to explain the grounds upon which we think the contract between the State and .the railroad company is free from all Constitutional objection. But before taking up that question it is proper to say that in our judgment the rights of the parties in the present suit do not, by any means, necessarily depend on its solution. If, as we think, the legislation of the State in question is constitutional and valid, the defence relied on by the appellee fails, and the judgment must of course be reversed. But if, for the purposes of the present case, it be conceded that the defendant’s position upon the Constitutional question is correct, that the effect of the Act of 1832, and its supplements, is to impose upon passengers a capitation tax, collected from them by the railroad company for the use of the State, above and beyond the mere charge for transportation, (and upon that ground alone is it contended that the one-fifth of the money paid by the passengers is an unconstitutional tax;) and if in point of fact a sum of money so collected has actually been received by the company, then it is money collected not for itself, but for the use of the State, and the question arises whether it is competent for the company to set up as a defence-to the action brought by the State, for the recovery of the money so received, that the Acts of Assembly under which it was collected were unconstitutional.

That is the question raised by the prayers offered °by the plaintiff, which were refused by the Superior Court. ' They assume for the purposes of the present case that the money collected from passengers for the use of the State was ³⁶³ an unconstitutional exaction from them, as alleged by the defendant, and yet assert the proposition that this furnishes no defence in the present suit; and that the plaintiff is entitled to recover one-fifth of the gross sum actually received for the transportation of passengers, and not already paid to the plaintiff “ without regard to any question of conflict between the Acts of Assembly and the Constitution of the United States.” Or to state the proposition more plainly, that the railroad company having collected certain moneys from passengers for the use of the State, cannot be allowed to retain the money, and refuse to pay it to the party to whom it belongs, on the plea that the persons from whom it was collected were not legally hound to pay it. In our opinion this proposition is a sound one, consonant with the plainest principles of reason and justice, and supported by an unbroken current of decisions. This action is indebitatus assumpsit, upon the implied promise of the defendant to pay to the State the money collected for its use: the receipt of the money for the plaintiff’s use being the ground of the action from Avhieh the implied promise springs. In such case the question of the validity of the laAV under which the money was collected cannot properly arise.

That is a distinct and collateral question which might have been raised by the persons from whom the money was collected, but cannot be successfully urged by the railroad company in answer to the suit of the State. Of course we are not to be understood as maintaining the proposition, that the legal rights of parties are dependent upon the mere form of action adopted, or that it is competent by resorting to an action upon an implied assumpsit, to enforce a contract, which could not be enforced by an action brought on the express contract. Such an evasion is not tolerated by the law, Avhieh does not alloAA^ that to be done indirectly Avhieh cannot be done directly. But if the foundation of the suit be something collateral to the illegal contract or transaction, and the plaintiff is not ³⁶⁴ obliged to resort to this in order to maintain the suit, or to derive any aid from it, then the illegality of the original transaction is not a defence to the suit.

There is a broad and well recognized distinction between suits to enforce illegal contracts, and those asserting title to money arising from them. We shall presently cite some authorities in support of this general proposition. But first let us examine more particularly the nature of the arrangement between the State and the railroad company, and see in what its supposed unconstitutionality is alleged to consist. There is no pretence of any intentional violation of the Constitution, nor is there any express provision of that instrument to which the State laws are repugnant, it is said they are in conflict with its general scope and spirit.

This is then not a case of iurpis contractus. The defence here urged is, that under its contract with the State, the company has added the moneys for the State’s account, to the fares it collected for itself, and thus collected from passengers a capitation tax for the use of the State, which could not be constitutionally imposed. Now if this be so, the illegality of the transaction consisted entirely in the supposed unconstitutional exaction from the passengers; they were the only parties whose constitutional rights were invaded; they having waived the question of legality and paid the money voluntarily to the railroad company, cannot recover it back, This position is settled by numerous authorities, among them we cite Lefferman vs. Mayor, &c., 4 Gill, 425 ; Morris vs. Mayor, &c., 5 Gill, 248 ; Balt. & Sus. R. R. Co. vs. Faunce, 6 Gill, 76 ; Lester vs. Mayor, &c., 29 Md., 415 .

That a party may waive' a constitutional provision which applies in his favor, was decided in Baker vs. Braman, 6 Hill, 48 , cited and approved by the Supreme Court in the recent ease of the Philadelphia, Wilmington & Baltimore R. R. Co. vs. Trimble, 10 Wallace, 382. The question then is, shall the defendant be allowed to retain the money as against the claim of the State? ³⁶⁵ It is certainly true that the Courts of justice do not lend their aid in the enforcement of illegal or unconstitutional contracts. But in the aspect in which the defence in this case is presented, the contract between the State and the company, if obnoxious at all to objection on constitutional ground, can only be so in respect to the collection from passengers of the one-fifth of the fare for the use of the State. It is perfectly clear that when the money lias actually been collected by the company, that part of the transaction which is supposed to be unconstitutional has been completed; the illegal contract lias been performed and is at an end, and in no manner enters into the question which subsequently arises between the railroad company and the State, as to the duty and obligation of the company to pay over the money to the State for whose use it was collected, and to which it belongs.

To that part of the company’s contract there remains no constitutional objection, and it is no answer to the suit of the State, instituted to inforce its payment by the company, that it was an unconstitutional tax upon the passengers. A point very analogus to this was expressly decided in Waters vs. The State, 1 Gill, 302. It was there held, that a collector who has received State taxes cannot set up the unconstitutionality of the tax as a defence to the State’s recovery. “Having admitted,” says Judge Aecher, p. 308, “the receipt of the money, the collector, who is in the light of an agent of the State, could not be heard to urge in his defence to a suit, that the money he had received was on account of taxes which the Legislature had no constitutional power to impose.” In Paley on Agency, 28 L. Lib., 62, the general principle is thus clearly and correctly stated: “ If money has been actually paid to an agent for the use of his principal, the legality of the transaction, of which it is the fruit, does not affect the right of the principal to recover it out of the agent’s hands. For though the law would not have assisted the principal, by enforcing the recovery of it ³⁶⁶ from the party by whom it was paid, because it is the policy of the law not to aid the completion of an illegal contract, yet when that contract is at an end, the agent, whose liability arises solely from having received the money for another’s use, can have no pretence to retain it.” This doctrine is fully sustained by a number of adjudged cases, some of which are cited by the author.

In Tenant vs. Elliott, 1 B. & P., 3, the defendant being a broker, effected an illegal insurance for the plaintiff on his ship. The ship being lost, the underwriters paid the amount of the insurance to the defendant, who, without any intimation from them to retain the money, refused to pay it over to the plaintiff. In deciding the case, Btjller, Justice, said: “ Is the man who has paid over money to another’s use to dispute the legality of the original consideration ? Having once waived the legality, the money shall never come back into his hands again, can the defendant then in conscience keep the money so paid ?

For what purpose shall he retain it ? To whom is he to pay it over but to the plaintiff?” Chief Justice Eyre said, in the same case: “ The defendant is not like a stakeholder. The question is, whether he who has received money to another’s use, on an illegal contract, can be allowed to retain it, and that not even at the desire of those w'ho paid it to him ? I think he cannot.” In Farmer vs. Russell, in the same volume, 295, the same principle was decided, and was recognized by Lord Chancellor Cottenham in Sharp vs. Taylor, 2 Phillips’ Chan.

Rep., 817, 818, and by Sir Wm. Grant, M. R., in Thompson vs. Thompson, 7 Vesey, 473. These cases have been cited and approved, and the same ' principle has been followed by the Supreme Court in McBlair vs. Gibbes, 17 How., 236, 237 , and in Brooks vs. Martin, 2 Wallace, 70. In the ease last cited, the bill was filed by one partner to recover his share of the profits of a partnership entered into for the purpose of buying soldiers’ claims in violation of an Act of Congress.

The Court say, (p. 79,) the traffic in which the firm was engaged was illegal; and yet the ³⁶⁷ bill was maintained upon the ground that the illegal contract had been completed and was at an end, and the suit was brought to recover the plaintiff’s share of realized profits. The opinion of Lord Cottenham in Sharp vs. Taylor, 2 Ph. Ch., is quoted at great length, citing the cases of Tenant vs. Elliott, Farmer vs. Russell, and Thompson vs. Thompson, as showing the difference between enforcing illegal contracts and asserting title to money which has arisen from them. The Court then say, (p. 81,) “ These cases are all reviewed in the opinion of this Court in McBlair vs. Gibbes, 17 Howard, 232 , and the language here quoted from the principal case is there referred to with approbation.

We are quite satisfied the doctrine thus announced is sound, and is directly applicable to the case before us.” We need only add that the principles upon which those cases rest, and which have thus received the unqualified sanction of the Supreme Court, appear to us to be consonant with reason and justice, and fully sustain the position taken by the appellant on the question now under consideration. In respect to the one-fifth of the money actually received from passengers by the defendant, which this suit was instituted to recover, as we have before said, the right of the plaintiff to recover does not depend upon the question of the constitutionality of the Acts of Assembly; for assuming the appellee’s views upon that question to be correct, this furnishes no defence to the present suit. For these reasons, we are of opinion the prayers of the appellant ought to have been granted. In the view we have taken of this case, as it is presented by the pleading and upon the prayers of the plaintiff, it may, perhaps, bo unnecessary to express any opinion upon the constitutional question ; but as that is presented by the defendant’s prayers, has been fully argued and has received our careful consideration, and as our silence on a matter of so much interest and importance might lead to some misapprehension with respect to the opinion entertained by this Court, ³⁶⁸ we consider it proper to state some of the reasons which have led us to the conclusion that the legislation of the State now called in question, is nowise in conflict with the Constitution of the United States.

In the preceding part of this opinion, we have treated the case as the plaintiff' has chosen to present it, assuming the hypothesis of the defendant’s prayers to be correct, and have shown that it does not affect the right of the plaintiff to recover in the present suit. But in our judgment this hypothesis is erroneous, and rests upon a misconstruction of the Acts of Assembly. It seems to us to be a great error to suppose that the arrangement between the State and the railroad company", under which the branch road was constructed and went into operation, and the company has enjoyed its franchise; whereby the company for valid and sufficient considerations contracted to pay the State a portion of its gross receipts from the transportation of passengers, can be fairly construed as imposing an unconstitutional tax upon passengers within the decision of the Supreme Court in Crandall vs. State of Nevada, 6 Wallace, 35. That case arose in this way.

The Legislature of Nevada, in 1865, enacted “ that there should be levied and collected a capitation tax of one dollar upon every person leaving the State by any railroad, stage-coach or other vehicle engaged or employed in the business 'of transporting passengers for hire.” “The proprietors, owners and corporators so engaged were required to pay the tax of one dollar for each and every person so conveyed or transported from the State. Eor the purpose of collecting the tax, another section required' from persons engaged in such business, or their agents, a report every month, under oath, of the number of passengers so transported, and the payment of the tax to the sheriff or other proper officer.” Crandall, the agent of a stage company, was indicted for refusal to make the required report and pay the tax. He plead that the law was unconstitutional and. void; his plea being overruled by the State Court, the ³⁶⁹ case was carried on writ of error to the Supreme Court, where the judgment below was reversed — all the Judges being of opinion that the law of Nevada was unconstitutional; two of them (Chief Justice Chase and Mr. Justice Clifford) considered that the State law interfered with the regulation of commerce between the States. The majority of the Court placed its decision upon the ground that the Nevada statute taxed every traveller for the privilege of leaving the State by any of the ordinary modes of transit, and that as the right to tax involved the right practically to prohibit, the law was an obstruction, and might, if such a power could be exercised by the State, be made a prohibition of the right of the citizen to unobstructed access to all parts of our common country, and of the right of the Federal Government to secure the presence of the citizen, in any part of the Union to aid in its civil administration, or to support it in war.

Such a power was held to be inconsistent with the implied powers of the Federal Government and the rights of the citizen under the Constitution of the United States, and therefore could not be constitutionally exercised by a State. The language used by the late Chief Justice Taney, in his dissenting opinion in the Passenger Cases, 7 Howard, 492 , is cited in the opinion of the Court as stating the ground upon which the decision of the Nevada case was placed, as follows : “A tax imposed by a State for entering its territories or harbors is inconsistent with the rights which belong to the citizens of other States as members of the Union, and with the object which that Union was intended to attain. Such a power in the States could produce nothing but discord and mutual irritation, and they very clearly do not possess it.” It is very clear that the case of Crandall vs. Nevada fell directly within this plain and salutary rule. The statute there under consideration imposed in terms a “capitation tax” upon every individual who left the State by a public conveyance.

It was held to be a tax upon the right of the citizen to pass through or leave the State, and involved .the power of pro ³⁷⁰ hibifcing the enjoyment of such right altogether. Such a power, it was decided, could not be constitutionally exercised by a State, no matter what terms the statute might employ. The Court say: “We should be very reluctant to admit that any form of words which had the effect to compel every person travelling through the country by the common and usual modes of public-conveyance to pay a specific sum to the State, ■was not a tax upon the right thus exercised.” Such was the decision of the Supreme Court in Crandall vs. Nevada, which being the decision of the Court of last resort, is a binding and conclusive authority upon the question. But in our judgment there is no analogy between that case and