MR. JUSTICE SHIRAS, after stating the case, delivered the opinion of the court.
It was found by the trial court, a jury having been waived, that John B. Gill, the plaintiff, had, on several occasions, while travelling on the railroad of the St. Louis and San Francisco Railway Company, between points within the territory of the State of Arkansas, been charged a rate in excess of that allowed by the statute. The defendant company set up, by way of defence, that it operated that portion of the railroad on which the plaintiff travelled as a purchaser and assignee of the St. Louis, Arkansas and Texas Railway Company, a corporation organized under the laws of the State of Arkansas; that, under the laws of Arkansas in force at the time of the incorporation of said last-mentioned company, in April, 1880, it had the right to fix and regulate the rate of charge for carrying passengers, not to exceed the sum of five cents per mile; that the legislature might from time to time, reduce the rates, but that the same should not be so reduced as to produce, as profits for the railroad company, less than fifteen per cent per annum on the capital actually paid in; and that until such profits did annually accrue to said company, it and its successors and assigns were entitled, without limitation, restriction, or control, to the right to fix such rates of fares as to it should seem proper, not exceeding the rate of five cents per mile; that such provisions of the law constituted a contract between the St. Louis, Arkansas and Texas Railway Company and the State, and that the St. Louis and San Francisco Railway Company having become, in a manner and form provided by the laws of the State, the assignee of the St. Louis, Arkansas and Texas Railway Company, and the owner of its road, franchise, and privileges, had succeeded to its right to charge passenger rates not in excess of five cents per mile, so long as its profits did not exceed fifteen per cent per annum on the capital actually paid in; that the said railroad, although completed for about five years, had never earned in profits an
To this plea or special answer the plaintiff demurred.
As a further plea or special answer the defendant company alleged, in connection with a history of the formation of the original companies, their consolidation, and the purchase of the consolidated railroad by the defendant, that, by a provision of the constitution of the State of Arkansas, in force at the time of the transactions narrated, it was provided that no charter of any corporation should be altered, annulled, or repealed in such a manner as to do injustice to the corporators; that the owners of the capital stock of the St. Louis, Arkansas and Texas Railway Company are the same and identical persons who own the capital stock of the defendant company; and that, if the rates of fare prescribed by the act of April, 1887, are enforced, the defendant company will not be able to earn a reasonable rate of interest on its indebtedness, or to meet the actual cost of transporting passengers and maintaining said division of its road; and that, therefore, said act of April, 1887, as far as it is applicable to the said railroad, is in violation of the constitution of Arkansas, and is unreasonable, and a taking of private property for public use without compensation,
The plaintiff demurred likewise to this plea, and the demurrers having been sustained, the defendant then offered to show that the St. Louis, Arkansas and Texas Railway Company had, on December 31, 1880, executed bonds to the amount of $600,000 and secured the same by a mortgage of all its property, franchises, and immunities to the United States Trust Company of New York, which bonds were yet wholly due and unpaid, and upon which the defendant was required to annually pay the sum of $36,000 as interest; that the defendant company has never, since the construction of said lines, been able to earn, from all sources, an amount, which, after paying for the actual expenditures, would yield to the defendant or to the original incorporators a profit equal to one per cent upon the capital stock actually paid in cash and used in the construction of such lines of railroads; that the actual cost of transporting each passenger over that portion of the defendant's railway in the plaintiff's petition mentioned exceeded the sum of three cents per mile; that at the times in plaintiff's petition mentioned the defendant could not actually perform the service of carrying the plaintiff or any other passenger over its railway for the sum of three cents per mile, but that the sum in cash which it was actually required to expend in the carriage of said plaintiff and other passengers was equal to three and three-tenths cents for each and every mile such passenger was carried, and that if defendant was required to perform the service at the rate of three cents per mile, it would be required to expend more money in cash for the performance of such service than it would receive from the passenger, and that the revenue or income which it would receive from all sources of profit other than the passenger traffic would not be sufficient to enable it to make good the amount which it would lose on its passenger business; that three cents per mile for the service rendered by the defendant in carrying passengers, at the times in plaintiff's petition mentioned, over the line of railroad therein described, was not reasonable compensation, and
To this evidence the plaintiff objected as incompetent and irrelevant; the objection was sustained, and the defendant excepted to the action of the court in sustaining the demurrers and in rejecting the said offers of evidence. There was judgment for the plaintiff from which the defendant appealed to the Supreme Court of Arkansas, from whose judgment, affirming that of the court below, a writ of error was allowed to this court.
The plaintiff in error bases its demand that the judgment of the Supreme Court of Arkansas should be reversed, on two propositions, first, that the act of April, 1887, as applied to the defendant's railroad, was a violation of a contract between the State of Arkansas and the various corporations which constructed or subsequently acquired the line of railway in question; and, second, that, as the act, as applied to the defendant's railroad, requires the defendant to do business at a positive loss, it therefore constitutes a taking of defendant's property without just compensation or due process of law.
The first proposition requires the plaintiff in error to show that there existed a contract between the State of Arkansas and the St. Louis, Arkansas and Texas Railway Company, which, under the existing facts, forbade the application of the act of 1887 to the business of that company, and that the plaintiff in error, the St. Louis and San Francisco Railway Company, succeeded to such contract right.
As already stated, the constitution of Arkansas contained, when the St. Louis, Arkansas and Texas Railway Company was organized, a provision that the general assembly should have the power to alter, revoke, or annul any charter of incorporation then existing, or that might thereafter be created,
The contention is that, if the facts show that the company has not earned fifteen per cent per annum on the capital actually paid in, the State is precluded, notwithstanding the power reserved in the constitution, from reducing the rates or charges.
The Supreme Court of the State, 54 Arkansas, 101, as we learn from the record in this case, was of the opinion that the power to alter and amend charters, reserved to the State in its constitution, was not parted with or controlled by the subsequent act of the legislature incorporating the railroad company and authorizing it to establish rates, and that accordingly the passage of a subsequent general law, prescribing rates, could not be deemed an infringement of a contract between the State and the company.
We do not find it necessary to express an opinion on this view of the case, but prefer to base our judgment on another ground, which will bring us to the same result. It has been frequently decided by this court that a special statutory exemption or privilege, such as immunity from taxation or a right to fix and determine rates of fare, does not accompany the property in its transfer to a purchaser, in the absence of express direction to that effect in the statute. Morgan v. Louisiana, 93 U.S. 217; Wilson v. Gaines, 103 U.S. 417; Chesapeake & Ohio Railway v. Miller, 114 U.S. 176.
These considerations dispose of the proposition that the act of April, 1887, if made to apply to the railroad of the plaintiff in error, would operate as a violation of a contract subsisting between the State of Arkansas and the St. Louis and San Francisco Railway Company.
We are thus brought to the second proposition relied on by the plaintiff in error, that, as the act, when applied to the defendant's railroad, requires the company to do business at a positive loss, it therefore constitutes a taking of defendant's property without due process of law.
Whether, if the power of the State to fix and regulate the passenger and freight charges of railroad corporations has not been restricted by contract, there can be found, by judicial inquiry, a limit to such power in the practical effect its exercise may have on the earnings of the corporations, presents a question not free from difficulty. Given the case of a general law prescribing rates to all companies, can the courts inquire whether such rates are reasonable, and may they find that as to one company the prescribed rates permit it to do business at a profit, and as to another, whose facilities are inferior, or where expenditures are greater, the rates afford no profit? And will the fate of the law, as to its validity, depend, in each case, on the result of such an inquiry?
This court has declared, in several cases, that there is a remedy in the courts for relief against legislation establishing a tariff of rates which is so unreasonable as to practically destroy the value of property of companies engaged in the carrying business, and that especially may the courts of the United States treat such a question as a judicial one, and hold such acts of legislation to be in conflict with the Constitution of the
The so-called Railroad Commission Cases, 116 U.S. 307, arose under an act of the State of Mississippi passed March 11, 1884, which created a railroad commission, and charged it with the duty of supervising railroads, and particularly with the duty of revising the tariff of charges. The Mobile and Ohio Railroad Company had been theretofore incorporated by a charter which granted to it "the right from time to time to fix, regulate, and receive the tolls and charges by them to be received for transportation." A bill was filed by the Farmers' Loan and Trust Company, a New York corporation, to enjoin the railroad commission from enforcing against the Mobile and Ohio Railroad Company the provisions of the railroad commission act, and averring that the complainants were the trustees in a mortgage that had been executed prior to said act, and that the enforcement of the latter would impair their security.
The court held, two justices dissenting, that the statute incorporating the company did not deprive the State of its power, within the limits of its general authority, to act upon the reasonableness of the tolls and charges so fixed and regulated, and reversed the decree of the Circuit Court which had granted an injunction as prayed for in the bill. We now refer to this case for the purpose of calling attention to the facts that the act provided that proceedings to enforce its provisions were to be instituted by the commission, and that the suit was in form a bill in equity to restrain the commission from applying the terms of the act to the Mobile and Ohio Railroad Company.
The case of Chicago Railway Co. v. Minnesota was a writ of error to review a judgment of the Supreme Court of Minnesota, awarding a writ of mandamus against the railway company. The State of Minnesota by an act, approved March 7,
Chicago Railway Company v. Wellman, 143 U.S. 339, was a contest over the validity of an act of the legislature of Michigan, passed in June, 1889, fixing the amount per mile to be charged by railways for the transportation of passengers. On the very day the law took effect, to wit, October 2, 1889, one Wellman went to the railroad company's office in Port Huron, and tendered for a ticket from that place to Battle Creek the sum of $3.20 instead of $4.80, which had been the regular fare. This was refused, and Wellman immediately brought an action for damages, and recovered a judgment for $101, an amount sufficient to take the case to a higher court; and ultimately the Supreme Court of Michigan affirmed the judgment sustaining the validity of the law. But the observations of this court by Mr. Justice Brewer are very pertinent to the present case. After stating the facts of the case, he said: "Can it be, under these circumstances, that the court erred in peremptorily refusing to instruct the jury that an act fixing a maximum rate at two cents per mile is unconstitutional? Is the validity of a law of this nature dependent upon the opinion of two witnesses, however well qualified to testify? Must court and jury accept their opinion as a finality? Must it be declared, as a matter of law, that a reduction of rates necessarily diminishes income? May it not be possible, indeed does not all experience suggest the probability, that a reduction of rates will increase the amount of business, and therefore the earnings?" And referring to the following observation made by the Supreme Court of Michigan in passing upon the case: "In the stipulation of facts or in the taking of testimony in the court below neither the attorney general nor any other person interested for or employed in
Similar observations may be found in Dow v. Beidelman, 125 U.S. 680, a case wherein the validity of the very act now in question was assailed, and where this court affirmed the judgment of the Supreme Court of Arkansas sustaining the act. In that case the action had been brought by a passenger claiming penalties because he was charged more than the statutory rates, and the case went off on an agreed statement of facts, and it was said in this court, by Mr. Justice Gray: "The plaintiffs in error do not contend that it is always or generally unreasonable to restrict the rate for carrying each passenger to three cents a mile. They argue that it is so in this
Reagan v. Farmers' Loan and Trust Co., 154 U.S. 362, is the last case to which we deem it necessary to refer. The principal facts of the case were these: In April, 1891, the legislature of Texas passed an act establishing a railroad commission with power to classify and regulate rates. After the commission was organized it proceeded to establish certain rates for the transportation of goods over the railroads in the State. Thereafter, in April, 1892, the Farmers' Loan and Trust Company of New York filed a bill in the Circuit Court of the United States for the Western District of Texas, making as defendants the railroad commissioners, the attorney general, and the International and Great Northern Railroad Company. The bill alleged that the complainant was the trustee in a mortgage on said railroad to secure a series of bonds, and averred generally that the rates fixed by the commission were unreasonable and unjust, and set forth certain specific facts which it claimed established the injustice and unreasonableness of those rates, and prayed a decree restraining the commission from enforcing those rates or any other
The Circuit Court entered a decree granting the injunctions as prayed for, restraining and forbidding the commission from enforcing the established rates, and from making or publishing any other or further rates.
The opinion of this court on appeal was that while it was within the power of a court of equity in such case to decree that the rates so established by the commission were unreasonable and unjust, and to restrain their enforcement, it was not within its power to establish rates itself, or to restrain the commission from again establishing rates.
After recognizing the previous cases as establishing the proposition that, while it is not the province of courts to enter upon the merely administrative duty of framing a tariff of rates for carriage, it is within the scope of judicial power and a part of judicial duty to restrain anything which, in the form of a regulation of freights, operates to deny to the owners of property invested in the business of transportation that equal protection which is the constitutional right of all owners of other property, the court proceeded to consider and discuss the question whether the rates prescribed by the commission were unjust and unreasonable. Upon reading the opinion it is obvious that the principal difficulty encountered was whether the facts alleged in the bill and cross-bill, conceded by the demurrers to be true, furnished the court sufficient evidence
As already stated, the defendant's railway was composed by consolidation of one incorporated in Missouri and of two incorporated in the State of Arkansas. The allegations contained
It therefore appears that the allegations made and the evidence offered did not cover the company's railroad as an entirety even in the State of Arkansas, but were made in reference to that portion of the road originally belonging to the St. Louis, Arkansas and Texas Railway, and extending from the northern boundary of Arkansas to Fayetteville in said State. In this state of facts we agree with the views of the Supreme Court of Arkansas, as disclosed in the opinion contained in the record, and which were to the effect that the correct test was as to the effect of the act on the defendant's entire line, and not upon that part which was formerly a part of one of the consolidating roads; that the company cannot claim the right to earn a net profit from every mile, section, or other part into which the road might be divided, nor attack as unjust a regulation which fixed a rate at which some such
Sometimes in acting on this subject the state legislatures have created commissions or boards of public works, with power to establish rates for the transportation of passengers and freight, and in such instances the course recommended by Mr. Justice Miller, already cited, may well be followed; that the remedy for a tariff alleged to be unreasonable should be sought in a bill in equity or some equivalent proceeding, wherein the rights of the public as well as those of the company complaining can be protected.
But there are other cases, and the present is one, where the legislatures choose to act directly on the subject by themselves establishing a tariff of rates and prescribing penalties. In such cases there is no opportunity to resort to a compendious remedy, such as a proceeding in equity, because there is no public functionary or commission which can be made to respond, and therefore, if the companies are to have any relief it must be found in a right to raise the question of the reasonableness of the statutory rates by way of defence to an action for the collection of the penalties.
However, we have seen that, in the present case, the evidence failed, in that it was restricted to a part only of the railroad, and that even if the evidence could be understood as applicable to the entire line in Arkansas, there was no finding of the facts necessary to justify the courts in overthrowing the statutory rates as unreasonable, but that, on the contrary, the company's case depended on allegations admitted by the demurrer of a party who, in no adequate sense, represented the public; and, upon the whole, we do not feel warranted, by all that appears in this record, in declaring invalid an act of the
The judgment of the Supreme Court of Arkansas is accordingly
Affirmed.
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