281 F. 977 | 4th Cir. | 1922
The essential facts are these: The Augusta-Aiken Railway & Electric Corporation, appellant here, operates an electric railway, 23.9 miles in length, between the cities of Aiken, S. C., and Augusta, Ga. All but half a mile of this railway is in South Carolina, and the jurisdiction of the Railroad Commission of that state is conceded. In 1917 the company divided its road into eight zones, and established a rate of 5 cents for each zone, or 40 cents from one city to the other. This rate is still in force, and under the laws of South Carolina cannot be raised without consent of the Railroad Commission.
In February, 1921, the company applied to the commission for leave to increase this rate to 9 cents a zone, or 72 cents for the entire trip, setting out in its petition that earnings for the year 1920 were not only insufficient to yield any return whatever on the value of its property, but left a deficit of more than $25,000, after paying operating expenses and making proper deductions for depreciation, taxes, insurance, and other charges. A hearing on this petition was had in April, and a report made in the following August, in which among other things, the commission says:
“Tbe railway company produced exhibits showing the amount of revenue and operating costs for a period of five years, commencing in 1915 and ending December 81, 1920. Only one of these years, 1918, showed any profit whatever, and that amounted to Qnly $311.56. During the years 1915, 1916, and 1917, the losses were, in round figures, $23,000. In 1919 this was reduced to less than $12,000. In 1920 the deficit amounts to $25,436.01.”
Notwithstanding this showing, the Commission refused permission to increase the rate, but instead ordered a reduction of service to the extent of practically one-half, on the theory that reduced cost of operation would afford financial relief. Shortly thereafter, in September, 1921, this suit was brought against the commission and its members to enjoin the enforcement of the 5-cent rate, and for such other relief as might be just and equitable.
“That although the governmental agencies having authority to deal with the subject may fix and enforce reasonable rates to be paid public utility corporations for the services by them rendered, that power does not include the right to fix rates which are so low as to be confiscatory of the property of such corporations.”
As the facts of that case were more favorable to the contention here considered than are the facts of the instant case, it is enough to say that the rate under review was not fixed by contract, and that refusal of a temporary injunction cannot be sustained on the theory that the company is bound by contract obligation.
“Questions of this character have arisen in a number of cases, and the usual case has been where the common carrier, such as the complainant, while operating under certain rates heretofore found to be reasonable and sufficient, has by a Legislature, a Kailroad Commission or other regulating body, been ordered to reduce its rates to a figure which was claimed to be unreasonable and confiscatory. In these cases, the courts, where they found that the rates were really unreasonable and confiscatory have enjoined the enforcement of such unreasonable and confiscatory rates; it. being held the courts cannot prescribe what rates are reasonable and proper since they have no rate-making power. Quite another question is presented when the complainant alleges that the reasonable rates under which it had theretofore operated*980 have by a change of circumstances become unreasonable and confiscatory, and therefore it should be allowed to increase its rates; and this is the question presented in the case now before the court. * * * The rule of law that under the provisions of the Constitution an arbitrary reduction of rates amounting to practically confiscation cannot be made by the state or any of its agencies as against existing corporations having in good faith made their investments and entered upon their operations under a tariff that afforded some return, does not mean that any such corporation, if it finds the existing rates wholly insufficient, is entitled to compel an increase of rates to a compensatory basis. Quite the contrary.”
The distinction thus sought to be drawn seems to us wholly unsubstantial. It is not the fixing but the enforcement of a confiscatory rate that invades the constitutional rights of the carrier. To deny permission to raise an existing rate is in necessary effect to enforce that rate, and obviously confiscation may be as completely effected by refusing an increase as by requiring a reduction. It is therefore immaterial whether the rate be confiscatory when it is prescribed, or after-wards becomes so by reason of changed conditions. The practical result is the same in the one case as in the other, and it cannot be doubted that the power of the courts to enjoin confiscation effected by reduction is equally ample, and its exercise equally obligatory, to enjoin confiscation effected by refusal to permit an increase. And the Supreme Court has repeatedly so held. Columbus Ry. Power & Light Co. v. City of Columbus, 249 U. S. 399, 39 Sup. Ct. 349, 63 L. Ed. 669, 6 A. L. R. 1648; Oklahoma Operating Co. v. Love, 252 U. S. 331, 40 Sup. Ct. 338, 64 L. Ed. 596; San Antonio v. San Antonio Public Service Co., 255 U. S. 547, 41 Sup. Ct. 428, 65 L. Ed. 777; Newton, Attorney General, v. Consolidated Gas Co., 258 U. S.-, 42 Sup. Ct. 264, 66 L. Ed.-, decided March 6; 1922. Indeed, these cases cover every material phase of the pending controversy and indicate unmistakably the proper course to be taken at this stage of the case.
It requires no argument to show that the rate which the commission refused .permission to increase is much below the level of reasonable compensation. The facts above stated are virtually admitted, and they speak for themselves. A rate which for some year's has yielded no return to capital investment, and under which the road is operated at a loss of several thousands of dollars a month, is so clearly confiscatory as to remove the question from the field .of discussion. This being so, the company has the right to appeal to the courts for injunctive relief, and it becomes the duty of the courts to afford such relief. Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, 14 Sup. Ct. 1047, 38 L. Ed. 1014; Smyth v. Ames, 169 U. S. 467, 526, 18 Sup. Ct. 418, 42 L. Ed. 819; Willcox v. Consolidated Gas Co., 212 U. S. 19, 29 Sup. Ct. 192, 53 L. Ed. 382, 15 Ann. Cas. 1034, 48 L. R. A. (N. S.) 1134; and cases above cited.
.'“It is likewise plain that, when an injunction is asked to restrain the enforcement of an unreasonable rate, the court may make its granting conditional upon the doing of equity by plaintiff, and thus may require the plaintiff to consent to charge no more than what seems to the court to he reasonable—just as, in tax. injunction eases, the plaintiff is often required to pay what the court thinks a fair tax before it will give relief against the excessive part. In any of these instances, there is an indirect fixing or determination by the court, but each of these indirect results is fully within the judicial power. In the present case, the findings and the injunction do not affirmatively fix a rate. They are directed only against any rate smaller than the sum named, and stand upon the underlying fact that even this sum will not bring a minimum reasonable return.”
To the same effect, and directly in point, are In re Arkansas Railroad Rates (C. C.) 168 Fed. 720, Public Service Ry. Co. v. Board of Public Utility Commissioners (D. C.) 276 Fed. 979, 990, and Newton, Attorney General, v. Consolidated Gas Co., supra, in which the condition imposed was approved by the Supreme Court.
The order appealed from will be reversed, and the cause remanded, with instructions to grant a temporary injunction, on condition that the company shall not charge a rate exceeding 8 cents a zone, or 64 cents from one city to the other, until the further order of the court.
Reversed.