3.3.1 The Old South (1831-1861): Law and the Beginnings of Industrialization

Mill dams and municipal subsidies

Crenshaw v. Slate River Co. – Virginia, 1828 (6 Rand. 245); Goddin v.Crump – Virginia, 1837 (8 Leigh 120); Caldwell v. Justices of County of Burke – North Carolina, 1858 (4 Jones 323)

  • Mill dam cases provided a good test of how far a state and its courts were willing to support “legal instrumentalism,” that is, use the law to encourage 19th century entrepreneurs at the expense of traditional interests in land and other property.  Mill dams provided power to mills but often flooded upstream lands in the process.  Mill dam laws prevented landholders from obtaining injunctions against mill owners as long as the owners paid for damage caused by the flooding.  Many jurists considered such laws essential in order to enable local farmers to grind their grain, but the laws troubled other judges because they seemed to benefit mill owners unfairly at the expense of upstream landowners.  
  • In Crenshaw, the leading coastal upper South mill dam case, Virginia’s supreme court imposed restrictions on a state law that required mill dam owners to clear the adjacent channels for navigation.  The court held the law was unconstitutional as to existing dam owners because it deprived them of property (namely, forced them to pay the cost of improvements) without due process. 
  • Internal improvement subsidies.  In the coastal upper South as elsewhere, internal improvement projects accelerated with the advent of railroads in the 1830s.  As the number of projects grew, the question arose:  could government funds be used to subsidize them?
  • Municipalities were eager to do so, because having a railroad often meant the difference between prosperity and oblivion.  But cities, towns and counties were hampered by the fact that many projects were unsuccessful and left their municipal backers with large losses that taxpayers had to bear.  Subsidy efforts were also hampered by the fact that under the law, municipalities could only aid projects that were public in nature. 
  • Courts in some states, particularly in the upper Midwest, balked at allowing municipal subsidies for what they viewed as largely private enterprises (see § ___).  But the coastal upper South had no such compunctions, as the Caldwell and Goddin cases illustrate.    Virginia and Maryland had actively promoted internal improvements since the 1780s; both continued to support improvements, particularly the B & O Railroad, even after the depression of 1837 dampened such sentiment in many other states.

Controlling Transportation Corridors

Chesapeake & Ohio Canal Co. v. Baltimore & Ohio Railroad Co. – Maryland, 1832 (4 Gill & Johnson 1); Tuckahoe Canal Co. v. Tuckahoe & James River Railroad Co. – Virginia, 1840 (11 Leigh 42); McRee v. Wilmington & Raleigh Railroad Co. – North Carolina, 1855 (2 Jones 186)

  • Before the industrial revolution, states usually granted exclusive charters to transportation companies.  Only one railroad, canal, or bridge could operate in a particular area.  As America grew and more transport was needed, owners of established franchises fought to prevent new ones from being issued.   But during the Jacksonian era, most American courts moved away from the traditional presumption of exclusivity:  franchises were now presumed not to be exclusive unless the legislature explicitly made them so. 
  • The Chesapeake & Ohio case was the last major case in which the exclusivity rule was applied.  The C & O Company received a charter from Congress, Maryland and Virginia in the 1780s to build a canal along the Potomac River in order to link the two states with the Ohio River.  After delays and ownership changes consuming almost 50 years, the C& O finally declared its intention to build; but in the meantime, Maryland had granted a charter to the B & O Railroad, which was attempting to build a line along the same route contemplated by the C&O.  Was there room for both? 
  • A closely divided Maryland supreme court decided on a 3-2 vote that the C&O’s claim had not expired despite its 50-year delay and that the C&O took priority over the B&O.  However, the majority hinted that if the B & O had not had other routes available in the Potomac valley, the result might have been different.  Two judges dissented and argued in explicitly instrumentalist terms that the needs of the industrial age did not permit a presumption that franchises were exclusive.  In Tuckahoe, Virginia’s supreme court sided with the Maryland dissenters, ruling that a transportation franchise (again, a canal company threatened by a railroad) would not be deemed exclusive unless the legislature said so.  In McRee, North Carolina’s supreme court reached the same result based on a state constitutional provision forbidding monopolies.
Laying the cornerstone for the Baltimore & Ohio Railroad (1832) - courtesy J.G. Howes and Wikimedia Commons

“The principles of good sense, not less than those of our institutions, inculcate the general propriety of leaving to individuals and to communities the right to judge for themselves what their interest demands, instead of fettering and controlling them, under the false notion that we the governors know what is good for them better than themselves.” – Justice St. George Tucker, in Goddin

“[T]he ability of the people, according to their own judgment, is to govern.  The law does not force them to subscribe, but allows them to take what stock they will.  Why then, may not a county make a subscription whenever it chooses and as often as it chooses?” – Justice ___, in Caldwell

 “It can never be conceded, that the incorporation of one co for internal improvement, is an implied negative of all future power in the legislature to incorporate other companies for other improvements. … Experience has proved, that monopoly is very ingenious in extending its rights and enlarging its pretensions.  Give it the carte blanche of an implied contract, and we whould soon find it without other limit than the limits of professional ingenuity; and the great mischief would at once present itself, of the improvement of the country being arrested by the perpetual objection of interference with chartered rights.”   - Justice St. George Tucker, in Tuckahoe

“I shall also view this case, unprejudiced by the assertion, that the canal being a public highway, its charter should be most liberally and favorably construed; whereas, that of the railroad establishing “a close,’ ‘odious,’ and ‘enormous monopoly,’ should be visited with a most rigorous interpretation.  Because, I regard a rail road, practically and beneficially, as great a convenience to the community, as any public highway; and those features of monopoly, so much complained of, are the inseparable attributes of that mode of internal improvement, deprived of which, it would lose all its value, and could no longer be esteemed as of public utility.” – Justice Thomas Dorsey (dissenting), in Chesapeake & Ohio