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28 Session.

No. 41.

ACCOUNT BETWEEN U. S. AND STATE OF MARYLAND.

[To accompany Senate bill No. 305.]

JANUARY 30, 1855.

Mr. HIBBARD, from the Committee of Ways and Means, made the fol

lowing REPORT

The Committee of Ways and Means, to whom was referred Senate bill

No. 305, entitled An act to direct a re-examination of the account between the United States and the State of Maryland,report:

That during the last war with Great Britain, the State of Maryland borrowed, on interest, certain snms of money, to be applied to the purchase of arms and ammunition, and to the equipment and pay of the militia called into service for the defence of the State. Soon after the close of the war, the State presented her claim against the government of the United States for the moneys so borrowed and applied. The claim, amounting to $436,000, was filed in the Treasury Department, investigated, and audited by the proper accounting officers.

It appeared, that between the 19th of June, 1813, and the 15th of August, 1814, inclusive, sums to the amouut of $436,000 were, at different times, borrowed by the State, on interest, at the rate of six per cent., pursuant to a resolution of her legislature, passed May 29, 1813. The resolution was silent as to the purposes for which the money was to be raised. Of the sums so borrowed, it was evidenced, to the satisfaction of the department, that $279,626 54 had been expended by the State for the use and benefit of the United States. This sum was allowed to the State of Maryland. The residue of the claim not being shown to have been expended for purposes of the United States, was rejected. Interest on the sums appearing to have been thus expended, and on which the State had paid interest, was sought to be recovered, but was disallowed on the ground, then generally assumed by the government, that the United States would not pay interest except in cases where they had expressly contracted so to do. The amount found due was refunded to the State by instalments, commencing in October, 1818, and ending in December, 1821. It was allowed and paid in extinguishment of the principal, and was so received by Maryland. It may here be remarked that the State, though she complained of the rejection of the balance of her demand for the principal debt, has not since made, and does not now make, claim upon the United States for any part thereof as such.

It also appeared, that on the first day of January, 1817, the State

paid her whole debt for the moneys borrowed and expended as aforesiid, by a transfer to her creditors, at par, of stocks of the United States, then held by ber, bearing interest at the rate of six per cent. It should, perhaps, be premised that the payment, by the Slate, of her debt, is not shown, by any direct proof exhibited to the committee, to have been by interest-bearing stocks, as above stated, but it was always so alleged by the claimants in the discussions which ensued, was never questioned by the United States, and appears to have been virtually admitted by the accounting officers. The committee, therefore, believe such to have been the fact, and have considered the case throughout upon that assumption.

Maryland continuing her claim for interest, Congress passed an act, approved May 13, 1826, entitled “An act authorizing the payment of interest due the State of Maryland." The first section of said act was as follows: " That the proper accounting officers of the treasury be, and they hereby are, authorized and directed to liquidate the claim of the State of Maryland for interest upon loans or moneys borrowed, and actually expended by her for the use and benefit of the United States during the late war with Great Britain.”

The second section provided, “ That in ascertaining the amount of interest due to the State of Maryland, the following rules shall be understood as applicable to and governing the case,” to wit:

1. “Thist interest shall not be paid on any sum which Maryland has not expended for the use and benefit of the United States, as evidenced by the amount refunded or repaid to Maryland by the United States.

2. “ That no interest shall be paid on any sum on which the State has not paid inierest.

3. “That when the principal, or any part thereof, has been paid or refunded by the United States, or money placed in the bands of Maryland for that purpose, the interest on the sum or sums so paid or refunded shall cease, and not be considered as chargeable to the United States any longer than up to the time of the re-payment as aforesaid."

Under this act, on the 13th of June, 1826, the claim of Maryland was transmitted for settlement, by the treasurer of that State, to the office of the Third Auditor of the United States, then the late Mr. Peter Hagner.

lis heading was as follows:

“ Dr. The Cnited States, in account for interest, per act of 19th Congress, 1st session, with the State of Maryland.

“1826. June 15. For interest on $280,154 54, being so much of the money expended by Maryland for the use and benefit of the United States as said States have refunded, viz:" &c., &c.

The sum allowed, in fact, was $279,626 54, as before stated, instead of the amount set forth in this account.

The account, as stated, made due to Maryland “$163,361 38, with further interest on $127,335 71, from the 15th June, 1826, until paid."

The princip'e assumed by the State for the computation of the interest was, in the language of the treasurer of the State, “that which postpones any diminution of the capital on which the act allows interest to be computed until the suns refunded exceed, in amount, the interest

accrued at the times they were paid, and then to diminish it only to the extent of such excess.”

The accounting officers of the treasury did not adopt this rule, but did adopt a method by which, when the United States had made a payment, by way of refundment, to Maryland, the interest was calculated at the rate of six per cent. up to the date of that payment and carried into the interest column; the amount refunded was deducted from the principal and the remainder formed a new sum. upon which interest was calculated until another payment was made, when the interest ihat had accrued in the mean time was again carried into the interest column, the amount refunded again deducted from the principal, and so on.

The Auditor also departed from the mode of settlement proposed by the State in this: that he allowed no interest after January 1, 1817, when Maryland paid her debt by the sale and transfer of her interestbearing stocks.

The amount of interest thus allowed was $66,563 22. It was received by the State, though under a protest from her legislature in the form of a memorial, addressed to Congress, to the effect that the mode of adjustment adopted was not “upon the principles of established usage and common justice," and asking, in substance, that a law might be passed authorizing such a settlement as the State desired. A similar claim has been asserted by acts and resolutions of her legislature at different times since said last-named adjustment. No further application in this behalf appe.irs to have been made to the Treasury Department, except that in February, 1827, a member of the U. s. House of Representatives, from Maryland, in consequence of resolutions passed by her legislature, addressed a note to the Third Auditor of the Treasury, asking to be informed “wherein he had departed, if at all, from the rule in the adjustment and allowance of interest due the State of Maryland, from that observed in the like account with the State of Virginia.” To this the Third Auditor replied that he was “not aware, in the settlement of the interest account of the State of Maryland, of having departed, in any respect, from the rule of allowance which governed in the adjustment of the interest account preferred by the State of Virgioia." No other application or notice was made to that department until since the pendency of the present bill.

One or more agents of Maryland appear to have been at Washington for the purpose of urging her claim against the government for interes', at different times, during a period of several years, after the allowance of interest under the act of 1826, and prior to the introduction of this bill.

During the second session of the nineteenth Congress, February 5, 1827, the State made application, by memorial presented to the House of Representatives, for an additional allowance of interest on this same account. The memorial was referred to the House Committee of Claims. The committee, at the same session, reported adversely, and were discharged from the further consideration of the subject.

At the first session of the twentieth Congress, the State renewed her application by a resolution of inquiry, introduced in the House. On the 12th of March, 1828, the Committee of Claims, to whom the subject

had been referred, made a report, in which, after setting forth the claim and reciting the provisions of the act of 1826, already quoted, they said: “The committee cannot see the propriety or necessity of relaxing the provisions of the law above cited. The same provisions have been adopted in relation to oiher States claiming, under similar circumstances, interest on advances which they have made, and the committee think no greater allowance ought to be granted either to Maryland or any other State. The following resolution is, therefore, submitted to the House:

Resolred, That the prayer of the petition ought not to be granted."

This report was laid upon the table, and the matter was not further acted upon.

It also appears, that during the same session of the same Congress, a bill, entitled “An act providing for the final settlement of the claims of certain States therein mentioned, for interest on their advances during the late war,” which had passed the Senate, was brought before the House of Representatives. The claim of Maryland was one of those included in this bill. It prescribed the same rule now proposed by that Slate for the calculation of interest. The House Committee of Claims, to whom the bill was referred, on the 5th day of May, 1828, made an adverse report, in which it was said, among other things, that the “Committec think the rules of settlement prescribed in the bill from the Senate are an impolitic, if not a dangerous, innovation upon the usages of the government, heretofore sanctioned by Congress." The report closed with a resolution that the bill be indefinitely postponed. It was referred to the Committee of the Whole House, and there the matter rested.

During the first session of the twenty-second Congress, on the 12th of January, 1532, another resolution of inquiry was introduced in the House of Representatives by a member from Maryland. The matter, with directions to "consider and report thereon," was afterwards, on the 24th of the same month, referred to a Select Committee, of which the member from Maryland who introduced the resolution was chairman. The committee appear never to have made any report, and thus that application ended. This is believed 10 have been the last movement in Congress upon the subject prior to the proceedings commencing in March, 1854, which resulted in the passage, by the Senate, of the pending bill; except that during the first session of the thirty-first Congress, in 1850, a member of the Senate of the United States, from Marrland, introduced in that body a bill for the settlement of this claim. The b ll was referred to the Committee on the Judiciary; and afterwards, during the same session, the commiliee was discharged from its further consideration

The foregoing is a summary of the facts which seem to bear most directly upon the questions now presented.

This bill prescribes, in effect, ihe same mode of settlement for which Maryland has beretofore contended. It is based upon the objections made by the State to the action of the Treasury Department, under the act of 1826. These objections may be siated as follows:

1. That the sums, amounting to $279,626 54, paid 10 the State from 1518 to 1821, and applied in full extinguishment of the principal, should have been respectively applied, first, to the satisfaction of the interest

due at the times of such payments, and the residue, if any, in reduction, pro tanto, of the principal.

2. That the State of Maryland having paid her debt, January 1, 1817, by an assignment of interest-bearing stocks, and having thus failed to receive the interest after that day, should now be allowed to recover interest up to the day when the claim, as now made, shall be finally discharged, instead of being stopped on the day when she paid her debt ; and thai, at any rate, by virtue of the third rule prescribed by the act, as already quoted, interest should have been allowed up to the time of the payment, to the State, of the first instalment in October, 1818. These rules of computation, if adopted, would, it is estimated, as applied by the State in her account presented, make due to Maryland, on the 4th of March next, the sum of $261,932 71, or thereabouts.

The committee have examined this application with the serious consideration due to the fact that it is preferred by a State of this Union; though we are not aware that, for this cause, it should be determined by a rule varying, in any respect, from that which would govern a like application from an individual citizen. We are deeply sensible of the meritorious nature of the original claim of Maryland, as well as of the patriotic and highly honorable action of that State upon the occasions out of which the demand arose. But we are of opinion that the grounds on which it rests are untenable. We think that the mode of adjustment adopted by the accounting officers of the treasury, under the act of 1826, was required by the spirit and by the terms of the law, as weli as in accordance, in its most material features, with the general and proper usage of the government.

Upon the sums advanced by Maryland, she had actually paid interest up to January 1, 1817, when she discharged both principal and interest. The United States had already refunded to her the principal debt. The interest alone was left unsettled. It was to provide for the settlement of this interest that the act of 1826 was passed. This purpose was clearly expressed by the title of the act and by all its terms. The form of the proceedings under it shows that its object was so understood by both parties. It authorized the refundment of the money which the State had paid as interest, and nothing more. The rule of computation followed by the Third Auditor was in accordance not only with the law, but with the custom of the government at that time in other similar cases. The intention of Congress and of the department seems to have been, not to recognise the liability of the government for interest as such, but to reimburse creditors for moneys actually expended for the government's use and benefit. To have adopted the method proposed by the claimants would have been in derogation of this rule. By treating a portion of the principal as still unpaid, and assuming the payment of that residue with interest thereon, it would have involved an infraction of the law which authorized the repayment of interest only. It is true that the government has, at a later period, varied the rule in cases of debts against the government, which had been paid by instalments, so far as to apply the payments, first, to the extinguishment of the interest accrued, and the balance, if any, to the principal, as is proposed by the bill. But this fact is not deemed a

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