Case ID: ohio-st_49/html/0102-01.html
Source: Caselaw Access Project
Author: {"author": "WiuwAMS, C. J.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

Railway Company v. Furnace Company.
    
      Railroad. Companies — Overcharges by, for freight — Acts of February 11, 1848, and March 30, 1875, construed — Penalty for overcharges, does not bear interest.
    
    1. By the phrase “its capital,” in the proviso of section 12 of the act of February 11,1848, (1 S. & C. 271) is meant the capital stock of the. company; and railroad companies, incorporated under that act, or by special act which confers upon the company the powers, and makes it subject to the restrictions and provisions of that act, whose net profits on an average of the ten years next previous to the passage of the act of March 30, 1875, (72 O. L. 143) amounted to a sum equal to ten per centum per annum upon the actual capital stock of the company, are bound by the provisions of the last named act, reducing the rates which may be charged for the transportation of persons or property upon the road of such company.
    
      Z. An issue of additional stock by such company, while the act of March 30, 1875, was in force, for amounts ascertained by computing interest on the original subscriptions, will not take the company out of the operation of the statute, although, for the year in which it was issued, the net profits óf the company were not equal to ten per cent, of the aggregate amount of the capital stock and such new issue.
    3. The provision of the act of 1848, that the reduction of the rates shall not be such “as to reduce the future probable profits below said per centum,” does not make it a condition to the validity of the reduction that' the future profits shall in fact equal that sum. While that provision enjoins upon the legislative body, the duty of exercising its deliberate judgment upon the facts before it, in regard to the probable future profits, it will be presumed, that in the enactment of legislation on the subject, that body has properly and in good faith performed the duty, and regulated the rates accordingly.
    4. Before judgment, the penalty allowed by the act of March 30,1875, for overcharges for carrying freight or passengers, does not bear interest.
    (Decided February 2, 1892.)
    Error to the Circuit Court of Lawrence county.
    The action below, was brought by the Furnace Company against the Railroad Company, to recover a penalty for an overcharge made by the defendant, for the transportation over its road of certain freight shipped by the plaintiff. It was originally commenced before a justice of the peace of Lawrence county, and taken thence, on appeal, to the court of common pleas, where the parties filed the following pleadings:
    “RFTITION.
    “The said plaintiff, Lawrence Furnace Company, says it is an incorporated company, duly organized under the laws of said state of Ohio, and that said Iron Railroad Company, defendant, is also an incorporated company, duly organized under the laws of said state; that this action came into this court on appeal from a judgment rendered by and before one Thomas Golden, a justice of the peace in and for Upper Township, in said county of Lawrence. And said plaintiff avers that said defendant is the owner of a certain railroad located in said county, known as the “Iron Railroad,” which said road is over twelve miles in length, and is not a road in course of construction, and the gross earnings of which, are less than four thousand dollars per mile per annum; that said plaintiff now is, and for the last six years and upwards has been the owner of Eawrence Furnace which is located in said county on the line of said railroad, ten miles from the city of Ironton, and for said period of six years and upwards, plaintiff has been manufacturing pig iron at said furnace and transporting the same upon and over said railroad to said city of Ironton, and for the like time has been transporting goods, merchandise and other articles of freight over said road; that on the 17th day of September, 1875, said plaintiff, in good faith and in due course of its business, caused to be transported upon and over said Iron Railroad while so owned and operated by defendant, as aforesaid, from said Eawrence Furnace to said city of Ironton, a distance of ten miles and no more (20,250 lbs) twenty thousand two hundred and fifty pounds of pig iron, for which transportation said defendant was entitled to demand and receive from said plaintiff the sum of $4.48 and no more, being at the rate of five cents per ton per mile; yet said defendant, its officers and agents, in violation of law, demanded and received of plaintiff for said transportation the sum of $10.10, being $5.62 in excess of the amount authorized by law for said transportation. By reason of the premises, plaintiff is entitled to recover from defendant the sum of one hundred and fifty dollars. The said plaintiff therefore, by virtue of and under the provisions of the statute of Ohio, in such case made and provided, asks judgment against said Iron Railroad Company, defendant, for said sum of one hundred and fifty dollars.”
    “ ANSWER.
    “ The said Iron Railroad Company for its first defense to the said petition of plaintiff says : That said Iron Railroad Company became and was incorporated by special act of the General'Assembly of the state of Ohio, entitled “An act to incorporate the Iron Railroad Company,” passed March 7, 1849, with powers to construct a railroad from the Ohio river in Upper Township, in Uawrence county, Ohio, to the south line of Jackson county, with the right at their discretion of continuing it in a northerly direction to the line of the Belpre and Cincinnati Railroad Company. By section three of said special act, it was and is provided that said company shall have the powers and be subject to all the restrictions and provisions of the act regulating railroad companies, passed February 11,1848, entitled “An act regulating railroad companies.” That the corporators named in said special act and their associates, shortly after the passage of said special act, to-wit: in the year 1849, as provided for by said act of February 11, 1848, and as authorized by said special act, organized the said corporation, accepted the privileges, powers, franchises and rights granted and conferred thereby, and became subject to all the restrictions, limitations and provisions of said act; and thereupon defendant under and by virtue of the rights, powers, privileges and franchises so granted and conferred, relying on and upon the faith thereof, proceeded to construct, maintain and operate a railroad from the Ohio river, in Upper Township, Uawrence county, for a distance of about thirteen miles and less than thirty miles in said Uawrence county, in the direction of and towards the south line of said Jackson county, and has also constructed and maintained side-tracks, turnouts, offices and depots as defendant deemed necessary, at and along the line of said road, and has constructed branches from the main line of said road to other places within the limits of said Uawrence county,-and in so constructing and maintaining said road, side-tracks, offices, depots and branches, and in equipping the same, defendant, from time to time and prior to the 30th of March, A. D. 1875, had expended and had then invested more than $400,000.00 of its capital. It avers further that in so constructing, maintaining, equipping and operating said railroad, side-tracks, offices, depots and branches, it availed itself of the powers, rights, franchises and privileges granted to and conferred upon it by said special act, and said act of February 11, 1848, and became and was subject to the restrictions and limitations of said last-named act and none other. It avers that for the transportation of property on its said road, ever since its said construction, it has charged and received such reasonable rates as were fixed by it from time to time, as authorized and provided for bj section 12- of said act of February 11, 1848. It • avers that by the provisions of said section 12 of said act it was and is provided that at any time after the expiration of ten years from the time any road constructed under the provisions of said act may be put in operation, it should be lawful for the general assembly to prescribe the rates to be charged for the transportation of persons or property upon said road, should they be deemed too high, and might exercise the same p'ower ten jmars thereafter: Provided, that no reduction should be made unless the net profits of the company, on an average for the previous ten years, should amount to a sum equal to ten per centum per annum upon its capital, and then not so as to reduce the future probable profits below the said per centum.
    “Defendant denies that on the 30th day of March, A. D. 1875, or at any time previous thereto, the contingency had arisen or existed that authorized or would authorize the general assembly to prescribe the rates to be charged b}' defendant for the transporation of persons and property upon said road, and especially it denies that at that time, or ■at any time previous thereto, the- exigencies existed that authorized or would authorize the general assembly to pass said act of March 30, 1875, and make the same applicable to defendant. It therefore says that as to defendant said act is unconstitutional and void.
    
      “ Second Defense. — For a second defense to the action of plaintiffs, defendant saj’s that plaintiff ought not to be permitted to maintain its said action against it, because it saj-s that the same is for a penalty accruing to them for an alleged violation of the provisions of the act of the legislature of the state of Ohio, passed March 30, 1875, entitled “An act to amend section 13 of the'act of May 1, 1852, entitled ‘An act to provide for the creation and regulation of incorporated companies in the state of Ohio as amended April 20, 1874, and to repeal an act therein named,’ ” and that the only right, if any, they ever had to maintain said action, was under and by virtue of said act of March 30, 1875, and that since the commencement of this action, and during the pen-dency of the same, to-wit: on the 6th day of April, 1876, by an act of the legislature then passed, and which took effect as of that date entitled “An act to amend section 13 of the act of May 1,1852,'entitled, ‘An act to provide for the creation and regulation of incorporated companies in the state of Ohio, as amended March 30, 1875, and to repeal an act therein named,” said act of March 30,1875 was repealed, and by the express terms of said repealing act, the repeal thereby of said act of March 30, 1875, had the effect to annul penalties accruing or accrued under said last-named act.”
    “ REPRY.
    “The said plaintiff, with leave, etc., now comes and for reply to defendant’s answer filed April 10, 1880, and as to the first ground of defense therein set forth, says it adinits the allegations to the effect that defendant was originally incorporated under said special act of March 7, 1849, and was subject to the powers, restrictions and provisions of said general act of February 11, 1848. That said railroad company organized under said acts and constructed thirteen miles of its line of road with sidetracks, turnouts, offices and depots, and workshops, and subsequently, under the general laws of the state, passed since the adoption of the present constitution of the state, and by virtue thereof, built branches. As to each and all other allegations of fact therein stated, plaintiff denies the same to be true.
    “For reply to the second ground of defense set forth in said answer, plaintiff denies that by the terms of said repealing act of April 6, 1876, or otherwise, plaintiff has been deprived of its right to prosecute to final judgment, its said cause of action, under the provisions of said act of March 30, 1875.”
    The case, coming on for trial, was submitted to the court upon the following:
    “AGREED STATEMENT OP EXACTS.
    “The facts in this case are agreed upon as follows:
    
      “ 1st. The Iron Railroad Company was incorporated under a special act of the General Assembly of the state of Ohio, passed March 7, 1849, and was granted all the powers and made subject to all the restrictions and provisions of the act regulating railroad companies, passed February 11, 1848. 3 Swan & Critchfield, Statutes 271, et 'seq.\ Ohio Railway Report, vol. 1, (1870,) 14, 520.
    “2nd. The railroad was constructed 13 miles upon the line designated in its charter, extending from the city of Ironton, in Eawrence county, to Centre Station, in said county. It was completed and put in operation between these points in December, 1852, and has been in operation ever since. It has not been extended beyond Center Station, but during the year 1873 the company built two branches, both within said county of Eawrence, called respectively, ‘Etna branch’ and ‘Hecla branch,’ of the aggregate mileage of 3J miles. At the date complained of, the road was not in course of construction, and its gross earnings were over $4,000 per mile, and net earnings or income about $1,700 per mile per annum.
    “3d. The facts admitted in the pleadings are to be treated as part of this agreement.
    “4th. The capital stock of the company was, by its charter, limited to an amount not exceeding $500,000.00. The amount subscribed was $123,700.00. Some small dividends in stock were afterwards made in the years 1857,1858, 1864 and 1865, to equalize the stockholders in respect to the different times when they respectively paid up their subscriptions; making the amount of the subscribed and paid for stock $129,550.00, for which certificates were issued to the several stockholders entitled thereto.
    “5th. From the year 1852 to 1876, the company, by its proper officers, made regular annual reports to the auditor of state, as required by the act of February 11, 1848, aforesaid, during which time ‘capital stock’ of the company was reported to be $129,550.00.
    “6th. On the 27th day of April, 1875, a stock dividend was declared by the company amounting to $175,550.00, and the annual report made to the auditor of state for the year 1876, shows this additional amount, making the whole capital stock $305,100.00, for which certificates of stock were duly issued to the several stockholders respectively entitled to the same.
    “7th. The said stock dividend, as claimed by said railroad company, was made upon the basis of computing interest on the several amounts paid on subscriptions of stock by the respective subscribers thereto, as authorized and provided in section 22 of said act of February 11, 1848, for a period of 22 years and 6 months.
    “8th. No cash dividend was made prior to said date, April 27, 1875, and the net earnings of said road remained in its business, and are used in improving the property, which, on the first day of April, 1875, amounted to $418,000.00.
    “9th. The charges for transportation complained of, were made by the defendant at the dates, for the quantities and distances, and at the rate stated in the plaintiff’s petition, and were paid by the plaintiff in the manner therein stated.
    “10th. Treating the ‘capital’ of the company within the meaning of the 12th section of the said act of February 11, 1848, as being the amount of its subscribed capital stock and paid in by its stockholders, viz: said sum of $129,550.00, the net profits of the company on an average for ten years immediately prior to either the 1st of April, 1873, or the 1st of April, 1875, amounted to a sum equal to more than ten per cent, per annum upon its capital. But treating the capital of the company as being $305,100.00, or as represented by and signifying the several amounts paid in, as aforesaid, by subscribers to the capital stock, with the accumulated profits retained in its business and as represented by the actual value of the property of the company, then the average net profits for said period of ten years prior to either of said dates did not amount to as much as ten per centum per annum on its capital.”
    Judgment having been rendered for the plaintiff, for the amount of the penalty claimed, and interest, amounting to the sum of $245.23, the defendant prosecuted error to the circuit court, where the judgment was affirmed; whereupon the defendant filed its petition in error here to reverse the judgments of the circuit and common pleas courts.
    Eleven other cases are pending in this court in which the railroad company is plaintiff in error, which involve the same questions here presented, and it is agreed by the parties thereto that judgment shall be entered in each of them in accordance with the decision of this case.
    
      Henry S. Neal and J. L. Anderson, for plaintiff in error.
    
      W. A. Hutchins and E. V. Dean, for defendant in error.
   WiuwAMS, C. J.

The plaintiff’s claim to the penalty, for the recovery of which the original action was brought, is based upon the act of March 30, 1875, (72 Ohio L. 143), which, among other things, provides, that “any corporation operating a railroad, in whole or in part, in this state,” which “shall demand or receive,” more than five cents per ton per mile for the transportation of pig iron, iron ore, etc., for any distance of five miles or more, “shall pay to the part3'' aggrieved for every such overcharge a sum equal to double .the amount of the overcharge, but in no case less than one hundred and fifty dollars to any bona fide claimant using said road in the due course of his business.” The provisions of the act are made applicable “to all railroads now in operation in this state, or organized under the provisions of the act entitled ‘ an act regulating railroad companies,’ passed February 11, 1848, and all other railroad companies now in operation chartered' by special acts of the general assembly since the passage of said act, which by the acts of incorporation make such railroad companies subject to the restrictions of said act of February 11, 1848, and to all railroads and railroad companies organized under any of the laws of Ohio;” except railroads not exceeding twelve miles in length, and those in course of construction, whose gross earnings are less than four thousand dollars per mile, “where such railroads are not owned or operated by corporations operating another road.”

The defendant company, it appears from the record, was incorporated under a special act of the general assembly, passed March 7, 1849, by the third section of which, it is provided, that the company “shall have all the powers and be subject to all the restrictions and provisions of the act regulating railroad companies, passed February 11,1848.” The twelfth section of the last mentioned act, authorizes such railroad companies to charge such reasonable rates for the transportation of freight for a less distance than thirty miles, “as may be from time to time, fixed by said company.” It contains the further provision, that “ at any time after the expiration of ten years, from the time any such road may be put in operation, it shall be lawful for the general assembly to prescribe the rates to be charged for the transportation of persons or property upon said road, should they be deemed too high, and may exercise the same power ten years thereafter: Provided, that no reduction shall be made, unless the net profits of the company, on an average for the previous ten years, shall amount'to a sum equal to ten per centum per annum upon its capital, and then not so as to reduce the future probable profits below the said per centum.”

In a case between these parties, reported in 29 Ohio St. 208, it was held, that railroad companies, incorporated as was the defendant, which had not relinquished their right to be governed by the act of 1848, “ and had not realized a net profit of ten per cent, on their capital for the ten years next preceding the passage of the act of March 30,1875, are not bound by provisions of the latter act reducing their rates of fare or freight below those allowed by section 12 of said act of 1848.” Unless, therefore, the defendant, either realized such profits for the period mentioned, or relinquished its right to be governed by the act of 1848, it did not incur the penalty recovered against it in the courts below. But if it did either, then the judgment for the penalty was correct. Whether the requisite amount of profits were so realized, depends upon the effect given the term “capital,” as used'in the proviso of section 12 of the act of 1848. If, by it, is meant the actual capital stock of the companj'', then the parties agree that the profits of the defendant were sufficient to make it subject to the provisions of the act of March 30, 1875. But, if it embraces not only the capital stock, but also the accumulated profits retained in its business, and as represented by the actual value of the property of the company, or, stock dividends amounting to $175,550.00, for which stock was issued on the 27th day of April, 1875, to the subscribers to the capital stock, as interest on the amount of their subscriptions, then the profits were not sufficient. When applied to corporations, the word “capital” is sometimes used in the sense of corporate property, and is distinguished from the shares and certificates of stock, which are the individual property of the stockholders and form no part of the capital of the company. Bradley v. Bauder, 36 Ohio St. 28. But the capital of a corporation, is generally understood and defined to be the property or means contributed by the stockholders as the fund or basis for the business or enterprise for which the corporation was formed. The word “stock” is sometimes added, and the phrase “capital stock,” is used couvertibly with the word “capital.” It is so used, in at least one instance, in the statute under consideration, as will be seen by reference to section six, which is as follows: “That whenever any railroad company heretofore incorporated, or created and incorporated under the provisions of this act shall, in the opinion of the directors thereof, require an increased amount of capital stock, the3 shall, if authorized by the holders of a majority of the stock, file with the auditor of state a certificate setting forth the amount of such desired increase, which shall not exceed the amount of the original capital of said company, and, thereafter, such company shall be entitled to have such increased capital as is fixed by said certificate.” This, while not controlling, is not without its importance in determining with what meaning and intent the legislature used the word “capital” in the subsequent section (section 12) of the same statute. Grounds of a more satisfactory character, however, for the construction we have concluded the statute should receive, are found in section twenty. That section requires each railroad company incorporated under the act, to make a report, in January of each year, to the auditor of state, “showing the amount of the capital stock of such company, the gross amount of tolls or receipts during the previous year, the cost of repairs and incidental expenses, the net amount of profits, and the dividends made; with such other facts as may be necessary to a full statement of the affairs and condition of such road, and the auditor shall annually, present an abstract of such report to the general assembly.” The object of the report to the auditor, and of the abstract required of him, evidently was, to furnish the legislature, the necessary information, to enable that body to intelligently exercise the power reserved to it by the twelfth section. With the amount of the gross receipts, the cost of repairs, and expenses of operating the road, before it, the legislature could readily ascertain the net profits for the period covered by the report; and having before it also, the amount of the capital stock, it is but a matter of calculation to determine whether the profits equal ten per cent, of that amount. And it is this result, for the requisite period of time, we think, that determines the power of the legislature, under the twelfth section, to reduce the rates for the trans--portation of persons or property by such companies. If it had been intended, that the value of the corporate property should be the basis of the computation, and, that the profits must equal ten per cent, on that amount for the specified number of years, to authorize the enactment of any law making reductions in the rates, it seems improbable that the legislature would have failed to require the value of the corporate property to be set forth in the report. True, it is provided, that the report shall contain “ such other facts as may be necessary to a full statement of the affairs and condition of such road,” and under this provision the company might include in its report the value of all the property belonging to the corporation; but it is not likely, that a matter so important, would be left to the discretion of the company, or be provided for only, in such general terms. The statute, in specific terms, requires the amount of the capital stock to be shown in the report, the necessity of which is not apparent, unless that is to be taken as the basis of the computation. Treating it as such, that, with the other facts which are also required to be specifically shown by the report, afford the general assembly all the information essential to intelligent legislation on the subject. looking to the whole statute, we are of the opinion, that by the phrase “its capital,” in the proviso of section 12 of the act of February 11, 1848 (1 S. & C. 271) is meant the capital stock of the company; and railroad companies incorporated under that act, or by special act which confers upon the company the powers, and makes it subject to the restrictions and provisions of that act, whose net profits, on an average of the ten years next previous to the passage of the act of March 30, 1875, amounted to a sum equal to ten per centum per annum upon the actual capital stock of the company, are bound by the provisions of the last named act, reducing the rates which may be charged for the transporation of persons or property upon the road of such company.

The limitation upon the amount of the reduction, contained in section 12 of the act of 1848, namely, that the reduction of the rates shall not be such “ as to reduce the future probable profits below said per centum,” does not make it a condition to the validity of the reduction, that the future profits shall in fact equal that sum. It simply enjoins upon the legislative body, the duty of exercising its deliberate judgment upon the facts before it, in regard to the probable future profits of such companies, and it must be presumed, that in the enactment of legislation on the subject, that body has properly and in good faith performed the duty, and regulated the rates accordingly. And if at the time of the passage of the law, the necessary facts exist which authorize its enactment and application to such companies, a subsequent change in the condition or affairs of the company will not take it out of the operation of the statute. Such changes may call for future legislation, from time to time, but cannot defeat the application of the statute so long as it continues in force. Hence, the fact, that after the adoption of the act of March 30, 1875, the defendant declared certain stock dividends, and issued stock for amounts ascertained by computing interest on the original subscriptions, as shown by the agreed statement of facts, did not affect the application of that act, nor relieve the defendant of the consequences of exacting rates in excess of those allowed by it.

Nor did the repeal of the statute, by the act of April 6, 1876, afford a ground of defense. The plaintiff’s cause of action accrued, and the action was commenced before the repeal occurred; and the repealing statute expressly saves actions pending at the time of its passage, and causes of action which theretofore “accrued to any person from whom such railroad company or corporation, by its officers or agents, shall have demanded or received fare or freight, at a rate above that allowed by law; provided, such person paid overcharge while using such railroad in the due course of his or her business, and not for the purpose -or with the view of obtaining the penalty provided by law for such overcharges, and such person may maintain his or her action in any court of competent jurisdiction for the recovery of such penalty.” The plaintiff’s action is within the terms of the saving clause.

But, while we think the plaintiff below was entitled to judgment for the penalty, it was error, in our opinion, to include interest upon it. The statute creating the penalty does not allow interest, and the liability is not of that character which entitles it to draw interest under the general statutes regulating the subject. Section 3179, (Revised Statutes) gives parties to bonds, bills, promissory notes and other instruments of writing for the forbearance or payment of money at a future time, the .right to stipulate therein, for the. payment of interest at any rate not exceeding 8 per cent, per annmm; and section. 3180, requires that “Upon all judgments, decrees, or orders, rendered upon any bond, bill, note, of other instrument of writing containing stipulations for the payment of interest in accordance with the provisions of section 3179, interest shall be computed till payment at the rate specified in such instrument.” Section 3181 provides, that “ In cases other than those provided for in the two preceding sections, when money becomes due and payable upon any bond, bill, note, or other instrument of writing hereafter made, upon any book account, or settlement hereafter made between parties, upon all verbal contracts hereafter entered into, and upon all judgments, decrees, and orders of any judicial tribunal for the payment of money arising out of a contract hereafter made, or other transaction which hereafter occurs, the creditor shall be entitled to interest at the rate of six per cent, per annum and no more.”

It is evident, penalties given by statute, do not belong to any of the classes of liabilities which bear interest under either of the sections alluded to. And, as was said by McElvaine, C. J., in Higley v. First National Bank of Beverly, 26 Ohio St. 81: “ Interest on such a claim, before judgment, not being expressly given by the statute, cannot be allowed.” Besides, no interest was claimed in the petition.

As the precise amount of interest recovered.is apparent on the face of the judgment, it is not necessary to remand the cause for the correction of that error, but the judgment will be here modified by deducting the interest, and in other respects affirmed.

Judgment accordingly.