Case Name: The Baltimore & Ohio Railroad Co. v. The Diamond Coal Co.
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1899-11-28
Citations: 61 Ohio St. 242
Docket Number: 
Parties: The Baltimore & Ohio Railroad Co. v The Diamond Coal Co.
Judges: 
Reporter: Ohio State Reports, New Service
Volume: 61
Pages: 242–252

Head Matter:
The Baltimore & Ohio Railroad Co. v The Diamond Coal Co.
Freight rates by railroad company — Discrimination of — Prohibition as to rebates — Sections 3366 and 3367 Revised Statutes — Promise to repay cannot be enforced.
1. A railroad company whose line extends to a point of intersection with a canal of the state cannot make a valid contract to repay to a shipper a portion of the freight paid by him, it being the regular rate posted by the company and received from other shippers, such contract being prohibited by sections 3366 and 3367 of the Revised Statutes, to prevent discrimination in rates of carriage. (Scofield v. Railroad Co., 43 Ohio St., 571, followed and approved.)
2. An action cannot be maintained to enforce a promise of such repayment.
(Decided November 28, 1899.)
Error to the Circuit Court of Muskingum county.
The Coal Company brought suit in the court of commoh pleas to recover from the railroad company on a petition whose material allegations are as follows:
On or about May 10th, 1877, the defendant — to enable plaintiffs to sell their coal to persons at Columbus, Ohio, and at points beyond that, at lower prices than they otherwise could, and thereby to compete successfully in their said business with other shippers of coal on other roads to said points; and to induce plaintiffs to make such sales and to ship, or cause to be shipped, such coal so sold over defendant’s lines of road to such points, whereby defendant might earn and receive freightage thereon — agreed with plaintiffs to transport all coal which they should thereafter so sell and so ship, or cause to be shipped, from points on said Straits-ville Division, to Columbus and points beyond, including Springfield and Dayton, and to charge those liable to pay the freight thereon, at the rate of one dollar per ton freightage. And defendant then and there further agreed with plaintiffs, that in consideration of the said business, so to be furnished defendant by plaintiffs, and the profits thereof to defendant, the defendant would pay plaintiffs in monthly payments, for each «and every ton of coal which they should thereafter so sell and so ship, or so sell and cause to be so shipped, the sum of fifteen cents; which sum, so to be paid, was, in said business, and in the said transaction, called by the said parties a “rebate.”
Said agreement remained in full force continuously from said 10th of May, 1877, to the 30th of June, 1878; during which time, from May 10, 1877, to March 1, 1878, plaintiffs, relying upon said agreement and promise of defendant, were thereby induced to sell and ship, and, in pursuance of said agreement and promise did sell, to persons at Columbus, and at points beyond, at prices lower than they otherwise could have sold without loss, and did ship, and cause to be shipped, from said Bristol Station, and over the lines of defendant’s road, to Columbus and points beyond, large quantities of coal, on which the freightage was by the consignees thereof duly paid to defendant; and on which the said rebate at the rate aforesaid, under the agreement aforesaid, amounts to $1035.90; of which amount the defendant paid plaintiffs, during said time, the sum of $500.70, but refused, and still refuses, to pay the balance thereof.
By reason of the facts hereinbefore alleged, there is due from defendant to plaintiffs, the sum of five hundred and thirty-five dollars and twenty cents ($535.20), with interest at 6 per cent, per annum, from June 19,1878; for -which sum and interest plaintiffs ask judgment against defendant.
The railroad company answered, setting up the following second defense:
And the defendant further says, that its line of railroad extends from the points designated in said amended petition, to-wit: Bristol station in the county of Perry, in the State of Ohio, to the city of Columbus, in said state; but does not extend to either the city of Springfield or Dayton, and that its said road intersects the navigable canals of the state, at the said city of Columbus, in the state of Ohio, and also in said county of Perry, and also in the county of Licking, in said state.
And the defendant further says, that the rates charged and collected upon the coal shipped for the plaintiffs during the period named in said amended petition, to the city of Columbus and points beyond, to-wit: Springfield and Dayton and other points were its regular, established, tariff rates for such service (shipping coal), and were the regular rates which the defendant during the period named in said amended petition, charged to its other customers and the public, for shipments (of coal) between said Bristol station and said city of Columbus and other points beyond named.
To this defense the coal company demurred. The demurrer was overruled in the court of common pleas and, the coal company not desiring to plead further, final judgment was rendered dismissing its petition. On petition in error by the coal company the circuit court reversed the judgment of the court of common please.
J. H. Collins and F. A. Durbin, for plaintiff in error.
This is an action to recover a balance dne under a contract to pay the plaintiff rebates on freights shipments over the defendant’s line.
The second defense shows that the line of road of the Baltimore & Ohio railroad connects with the navigable canals of the state, and that the rates charged and collected for .the coal shipped by the plaintiff were its regular established tariff rates for such services and were the regular rates which the defendant company charged its other patrons for like services.
These allegations are in accordance with Sec. 3366 of the Revised Statutes. Sec. 3367 provides for the publication of the rates so established and further provides that the statutes shall not be evaded by drawbacks, rebates, etc. Sec. 3373 contains the long and short haul clause and a penalty for its violation.
It was contended by the plaintiff that because this answer does not set up the publication of those rates that it is no defense. Sec. 3366 provides for the fixing and establishing of tariff rates. Sec. 3367 provides for two things; one is for the publication of the rates so fixed; and the other is a prohibition against charging less than that rate.
The question presented by this demurrer is whether the contract set out in the petition, when viewed in the light of the allegations of this second defense is a valid contract, to the enforcement of which the courts will lend their aid. We claim it makes no difference whether the railroad company published their rates or not, the thing the law aimed at was “equality” and the destruction of unfair discrimiations; in other words, the common carriers should be in fact the common carriers and should carry for all alike. The law was enacted to prevent railway companies from doing the exact thing the plaintiff in this action is attempting to enforce through the court. 56 Fed. R., 21.
The pleadings in this case show that the rates charged for the coal hauled for plaintiff were the •regular established tariff rates of the defendant and were the rates other shippers were paying. It also appears that by this rebate the plaintiffs were in fact getting a less rate on their coal than other shippers were getting on theirs, so that it was a clear case of discrimination in the rates in favor of the plaintiffs. It was not an executed contract but an executory one, for the entire amount of the fixed tariff was paid upon this coal and the plaintiffs depended upon an executory contract by which the defendant agreed in effect to refund to them a part of the freight so paid, and the plaintiffs are here now seeking to enforce that executory contract. .The question is then presented for consideration, will the courts lend their aid to the enforcement of such a contract?
We claim that that contract is against public policy, and against the direct provisions of the Ohio Statutes and will not be enforced by any court.
A discriminating rate on shipments of coal can not be justified on the ground of the cost of mining-coal to the company in whose favor the rate is made. Union Pacific R. Co. v. Goodridge, 149 U. S., 680; Union Pacific R. Co. v. Taggert, 149 U. S., 698.
An analogous case has been before this court in the case of Scofield v. Railway Company, 43 Ohio St., 571.
In determining the main question in this case the courts will not consider whether the defendant gets any advantage of the plaintiff in the trans action, but when the court determines the contract is against public policy, then we insist it will leave the parties where it finds them. The statutes of Ohio clearly prohibit such a contract as is set out in the petition and the answer. That is, the statutes prohibit the railway company from doing the very thing the plaintiff is here insisting upon. It is not necessary that the statute should declare the contract to be void. It is only necessary that it should prohibit it, or that it should be prohibited on the grounds of public policy. Hote v. Green, 13 Am. Rep., 737.
To the same effect is the case of Fowler v. Sculley, 13 Am. Rep., 699; Hall v. Coppell; 7 Wallace 542; Guernsey v. Cook, 120 Mass., 501; Marshal v. R. R., 16 Howard, 314; Bishop v. Palmer, 16 N. E. Rep., 298; Nestor v. Continental Co., 41 Am. St. Rep., 894.
We claim from the foregoing authorities:
1st. The contract for the payment of the rebate which made the freight on the plaintiff’s coal less than the regular established rates, and less than that paid by the other shippers was,
a. Contrary to public policy and void.
b. In direct violation of both the letter and the spirit of the Ohio Statutes, and void.
2nd. The contract being against public policy the courts will not lend their aid to its enforcement, and it is no objection to this position to say that it works to the advantage of the defendant. The object of the law is to prevent discrimination and to benefit the public, and if, in its refusal to enforce a contract against public policy, -a defendant in the action is benefited it is simply an incidental benefit that accrues to him by reason of the court’s enforcing the law and refusing relief to a party who grounds his actions upon a contract prohibited by statute as well as by every principle of public policy and common justice to the public.
Beard & Beard, for defendant in error.
This is what is called a “discrimination” case.
This contract is not immoral. The freight charge was the customary rate. The purchaser agreed to pay, and did pay it, on the price. It was not fraudulent as to them, and it was a private matter between this plaintiff and defendant and does not concern any. one else, and it worked no injury to anyone.
For ten moths next after the making of this contract the defendant performed it on its part, except making the payments in full, although it received the freight in full as the coal was delivered. This defendant is the only one complaining of this contract, and it is in no way injured except in its imagined dignity, and it asks this court to place a stigma upon its act for being a party to a contract which is scorned by the public, as it alleges, and inflict upon it the degrading punishment of leaving it where it finds it, with about $1200 of our money in its pocket, thereby putting an end to this case at the costs of this plaintiff.
The petition says that this contract was in force more than thirteen months, and was being performed by both parties through nearly the ten first months. The rebate was to be paid monthly, but it was not done; but during that time payments of rebate were made aggregating $500.70. This money could not have been thus appropriated without the knowledge of this defendant, and it would not have been, without this defendant’s consent. The petition says the defendant was a party to the contract, and that the defendant made the pay ments; and no matter who represented the defendant in the making- of the contract, it adopted his act by hauling the coal, collecting the freight, and making partial payment.
May this defendant be heard, under these circumstances, when it comes into court and asks that it may be allowed to keep this money, because it obtained it by a contract which is void on the ground of public policy; Ex parte Benson, 18 S. C., 38; Johnson v. P. & P. R. R. Co., 16 Fla., 623; 12 Gray, Mass., 393.
If this defendant had refused and failed to comply wtih all the provisions of 3366, and 3367, could any action or proceeding have been maintained against it for the noncompliance? These two sections, as well as the other eleven, were intended as penal statutes. Is any penalty attached to, or provided for, in case of non-compliance with the provisions of 3366 or 3367? If so, where is it? It is not named in either of the two sections. It is not contained in 3370 and 3371, for the penalties therein named are expressly limited by 3371 to the three sections which immediately precede it. There does not seem to be any penalty attached for noncompliance with 3372. The penalty named in 3376 is limited by it to the two sections which immediately precede it, and they are sufficiently comprehensive to fix the maximum rates on all railroads then in the state, except the provisions of Sec. 3377. The penalty named in 3376 is for charging, or receiving a higher rate than is fixed by law, and certainly has no application or reference to any rate fixed, or to be fixed by a railroad company, as 3374, 3375 and 3378, fix the maximum rate, and no railroad company may fix a higher rate. The marginal note to Sec. 3376 (R. S., 1890), and the black let ters to the same section, in the last revision, say the penalty named in 3376 applies to Sections 3374, and 3375. It probably includes 3378.
Section 3373 names a penalty for the violation of its provisions; and that penalty is for charging, or receiving a higher rate on one shipment than on another, over the same line of road, where the freight is of the same class or kind. Section 3373 is not correctly copied in the report of the Scofield case (43 Ohio St., 615), as the word “such” is omitted, making it read “every violation of law,” instead of “every ‘suck’ violation of law,” which makes it apply to the provisions of 3373 only, which of course includes all of what 3373 relates to. There are two penalties named in this section — the one, to the aggrieved party, the other to the state. But, is there, in fact, any penalty? It may possibly provide for the $25 penalty which is to go to the party aggrieved, and is independent of the other one named; but do not both, as to their enforcement, depend upon the same contingency? for evidently the last one does depend on a contingency, and it is submitted, that for that reason, it is not a penalty. Before any prosecution can be commenced the complaint must be made to the prosecuting attorney of the proper county, and he must be satisfied that the provisions of the section 3373 have been violated, thus making its enforcement depend entirely on the discretion, the whim, or caprice, the favor or the disfavor, or the bias, or prejudice of a prosecuting attorney. A dozen persons might refuse and fail to comply, and one or none be prosecuted, or one or all be proceeded against. Certainly that is not the certainty which the law demands. C. & A. R. R. Co. v. The People, 67 Ill., 11; T. W. & W. R. R. Co. v. Elliott, 79 Ill., 67.

Opinion:
Shauck, J.
On behalf of the plaintiff in error lit is contended that in view of the facts alleged in the second defense, the contract set ont in the petition is void because it is contrary to public policy and violative of the provisions of our statute (sections 3366 et seq.) prohibiting discriminating rates of carriage. These questions have been the subject of many decisions, those made prior to the year 1885 being collected and analyzed in Scofield v. Railway Co., 43 Ohio St., 571, where a contract contemplating such discrimination in the rates of carriage was held to be unlawful, and further discrimination enjoined. It was there also held that the provisions of statutes and special charters prohibiting such discriminations are but declaratory of the common law. A more recent discussion of the question may be found in Union Pacific Ry. Co. v. Goodridge, 149 U. S., 680.
The remaining question is whether the carrier's contract to repay to the shipper a portion of the regular rate of carriage by him actually paid to it can be enforced by action. Since the amount actually paid by the coal company was the regular rate posted for the carriage and paid by other shippers, it is obvious that the stipulation counted upon in the petition is that which renders the contract illegal. That courts organized to enforce the law will not lend their countenance to a claim founded upon its violation has been long and uniformly held, except in thosé cases where a departure from principle is required by statute. A consideration of the moral right of the carrier to retain money which it has agreed to repay would only divert attention from the merits of the case. A recovery in such case is not denied because of any supposed rights of the promissor, but out of that respect for the law in which the courts should not be wanting, although the parties may be. The recovery will be denied however and whenever the illegality of the contract upon which a recovery is sought may be made to appear. The defense need not be interposed by the promissor. It could not be effectually waived by him. As was said by Justice Swayne in Coppell v. Hall, 7 Wall., 542: "Whenever the illegality appears, whether the evidence comes from one side or the other, the disclosure is fatal to the case. No consent of the defendant can neutralize its effect. A stipulation in the most solemn form to waive the objection would be tainted with the vice of the original contract, and void for the same reasons."
Judgment of the circuit court reversed and that of the common pleas affirmed.