Corporation Commission v. Railroad

Lead Opinion

Clark, C. J.,

after stating the facts. For more than ten years the people of a large part of the eastern portion of the State, having occasion to> come to tire capital or to the ad] acent central section, have found their most direct and convenient route to- be via Selma, at which point by its schedule the southbound train No. 39 of the defendant Atlantic Coast Line, delivered its passengers at 2:50 P. M. daily in time to connect with the Southern Railway westbound train No. 135 from Goldsboro to Greensboro. On 3 October, 1903, the Southern notified the Corporation Commission that owing to the condition of its track it was dangerous to maintain its speed — thirty-eight miles per hour — on its train No. 135, and proposed to leave Goldsboro thirty minutes sooner, which would cause its arrival a few minutes earlier at Selma. This the Commission found to be nroper and reasonable. It was brought to the attention of the Commission by proper complaint made, that for many months the Atlantic Coast Line had failed to make this afternoon connection regularly at Selma at its schedule time to the great inconvenience of the traveling public, and it was asked to order the afternoon .connection to be resumed and observed. After much correspondence with the officials of both roads the Commission on 8 December, 1903, ordered that the afternoon connection should be made, and to that end directed tba.t the defendant should quicken its schedule so as to arrive at Selma at 2:25 instead of 2:50 P. M. as before, an advance of twenty-five minutes, but as the same order required the Southern train to wait fifteen minutes whenever the Atlantic Coast Line was delayed for any cause, the order practically required the defendant to arrive ten minutes earlier. Objection being taken, the order was suspended and both companies were summoned before the Corporation Commission, and after investigation and argument on 16 January, 1904, the order was renewed. The Southern thereupon acquiesced in the order. The' defendant alone filed exceptions, upon which testimony and argument were heard and the Commission renewed its order in the same terms, 13 February, 1904. On appeal by the defendant to the Superior. Court, there were sundry issues submitted over the exception of the Corporation Commission. But as the order of the Commission appealed from simply directed the connection to be made as in former years, prescribing no details of the method (which was left to the judgment of the defendant itself) save an acceleration of twenty-five minutes, subject to a delay of the Southern train of fifteen minutes, when the defendant’s train should be late, we think the matter could have been and was fully disposed of by affirmative response of the jury to the 8th issue — “Is it reasonable and proper that for convenience of the traveling public the defendant company should be required to make such connection ?”— taken together Avith the findings upon the 6th and 7th issues, that even if an additional train should have to be put on between Rocky Mount and Selma, the loss to the defendant would be fifteen dollars per day (which might be overcome by the increased travel induced by certainty of connection), and the official returns made by the defendant to the Commission 30 June, 1903, as required by laAV and which are in the evidence, that the net earnings of the defendant from its op-©rations in North Carolina amounted for the year ending-30 June, 1903, to $1,903,116.63, with a surplus of nearly $1,300,000 after paying interest on its debts and five per cent, dividends on its stock, both common and preferred, from the net earnings of the entire line. It is surely sufficiently large, as it stands, to justify the affirmation of the order of the Corporation Commission that this great inconvenience to the public should be avoided, even at a cost to the defendant of fifteen dollars per day, when the net earnings of the defendant from all its operations in this State approximate $2,000,000' annually, and tire net surplus of the defendant’s whole system, after payment of interest on its debts and dividends on its stock (whether watered or not), amounts to near $l,300,000 annually. And upon such verdict the Judge below should have entered judgment affirming the order of the Corporation Commission and we should reverse his judgment and enter such judgment here, provided (1) the Legislature has conferred such authority upon the Commission, (2) and the Legislature was not restrained by any provision of the State or Federal Constitutions from granting such authority. Mr. Davis, the able and accomplished counsel of the defendant, states this clearly in his brief: “The defendant’s contentions in brief are as follows: 1. That the Corporation Commission had no power or authority to make the order in question in this cause. 2. That the order is- in violation of the Constitution of the United States and the State of North Carolina. 3. That the order is unreasonable and unjust.” His third contention is settled by the verdict and finding as above stated. As to the first proposition, we think the General Assembly clearly intended to confer and did confer tire power upon the Commission to order connection made by any two railroads when the public convenience required it, and the order was just and reasonable. This is not an arbitrary power, for, as in this case, such order is subject to review by a Judge and jury on an appeal to the Superior Court, whence a further appeal lies to this Court.

Section 1 of the Corporation Cbmmission Act (Acts 1899, chap. 164) in enumerating the qualifications, the duties and powers of the Commission, provides that “they shall have such general control and supervision of all railroad * * * companies or corporations and of all other companies or corporations engaged in the carrying of freight or passengers * * * necessary to carry into effect the provisions of this act.” Section 21 of the act provides that “All common carriers subject to the provisions of this act shall according to their powers afford all reasonable, proper and equal facilities for the interchange of trafile between their respective lines and for the forwarding and delivering of passengers and freight to and from their several lines and those connecting therewith, * * * ¿md connecting lines shall he required to make as close connection as practicable for the convenience of the traveling publicThis provision is positive, clear and mandatory. Common carriers are (1) to afford all reasonable, proper and equal facilities for the interchange of traffic and forwarding freight and passengers. This would include both the place and time of delivery and forwarding of passengers and freight. The terms of the law are general and cannot be interpreted to mean alone the place at which passengers and freight are to be delivered; it does not mean simply facility for delivery which might be confined to the place, but also requires facility for forwarding which includes time as well, and prohibits such management as would produce delay in forwarding passengers. This requires close connection in point of time with connecting lines. (2) In the second place, common carriers are “to make as close connection as practicable for the convenience of the traveling public.” The defendant insists that this last requirement means simply a physical connection, that is, a track connection. It is contended that tlie demands of tbs law would be met by a simple joining of the railroad iron of one railroad to that of another, regardless of the time of the delivery of passengers at the junction, and of their finding the means of “traveling” on or continuing their journey, and of the delays and inconveniences resulting from a failure to make connection of trains. The statement of this proposition, even if the acts were ambiguous, contains its own refutation. But the language is plain and unequivocal, and, as Mr. Argo, of counsel for the Commission, well says, “The requirement is that ‘connecting lines shall make as close connection as practicable for the convenience of the traveling public.’ This means that those railroads that have or pretend to have a physical connection, a connection of tracks, shall also have as close a connection of trains as practicable, in order to secure the convenience of the ‘traveling public.’ It is well known that the principal inconvenience attendant upon traveling arises from delays reuniting from failure of trains to connect according to time schedules. It would contribute little to the convenience of the traveler to be dumped out upon a track making a ‘physical connection’ and be compelled to wait for hours, frequently without food or adequate shelter and in the night, for a train upon which he might proceed on his way. The connection required is one of trains as well as of tracks. The public cannot travel upon a track alone, nor upon a train without a track; both are required to furnish facilities for traveling at all, and a close connection of both to secure the convenience of the traveling public.”

It is true that section 1957 (9) of The Code of 1883, originally enacted in 1871-’72, gave to railroad companies themselves the right to “regulate the time and manner in which passengers and property shall be transported,” but by the Act of 1891, chap. 320, creating a Railroad Commission, the State made a radical change in its attitude towards railroads. It asserted its power to supervise and regulate their conduct, forbade discrimination and issuance of free passes, conferred upon the Bailroad Commission the power to regulate and to fix their charges for freight and passengers, to prohibit rebates, to make joint through rates, to make personal visitation of all railroad offices and places of business, to examine their officers, agents and employees under oath, to require all contracts and agreements between railroads, as to their business in this State, to* be submitted for approval, to require annual reports from the railroads, to require the railroads to make repairs to their tracks and additions to or changes of their stations, forbade the abandonment of any station without the permission of the Obmmission, to require (if the Commission saw fit) separate accommodations for the races at tlie stations and in the ears, and “that connecting lines shall be required to make as close connection as practicable for the convenience of the traveling public,” and many other matters which before that had been left to the railroads themselves. This act was passed after the fullest discussion for years before the people of tlie State. It expressed their deliberate conviction that the time had arrived when the State, in the public interest, should supervise and control the charges and the conduct of common carriers, including express companies, telegraphs, telephones and steamboats. Similar legislation had preceded our act in England, in the Federal Congress and in many of our sister States. Similar legislation has now been adopted in most of the States. The Act of 1891 modified The Code, sec. 1957 (9), certainly to the extent that the right formerly conferred on railroad companies of fixing the time of running their trains was made subject to the power of the Commission to require connections to be made, wherever public convenience should require this to be done, and the order was reasonable and just. That act (1891, chap. 320) had a repeating clause as to all previous legislation in conflict with it. The present Act of 1899 renewed the general provisions of the Railroad Commission law, with some extension of its powers and changes, but re-enacting verbatim the provision requiring connections to be made and giving the Corporation Commission “General control and supervision of all railroads” with all powers “necessary to carry out the provisions of this act.”

In this case the excuse of the defendant for its often missing connection at Selma since 1900 is that train No. 39 was a through train and that its increase in business made it more difficult to get to Selma in time. It may be natural that the officers of the company, looking to profits^ should prefer the through business to the neglect of the convenience of the people of North Carolina, and should be reluctant to avoid the delay caused by heavy through business by putting fifteen dollars per day of its profits into affording the required convenience by an additional train, if necessary. But it is precisely because just and proper regard for public convenience did not always coincide with the largest profit to the corporation that the State had to enact a statute giving to the Corporation Commission the power to regulate their rates, require suitable connections to be made, and a general supervision of their conduct. An act of the Legislature or order of the Commission reducing the defendant’s charges for freight and passengers many hundred of thousands of dollars would be valid if it left enough profit, over running expenses, “with economical salaries and management (of which the Court will judge) to pay interest on its bona fide debt and some profit to stockholders.” Wellman v. Railroad, 143 U. S., 339. It follows that this order, even if it cost the defendant fifteen dollars per day, is in the power of the Commission, if it serves public convenience.

The other point as to the constitutional power of the Legislature to so enact is also well settled. The general power of the Legislature to provide reasonable rules and regulations, directly or through a commission, lias been held by ns in Express Co. v. Railroad, 111 N. C., 472, 32 Am. St., 805 ; in Corporation Commission v. Railroad, 127 N. C., 288, and cases there cited. Among the Federal decisions this was asserted in Munn v. Illinois, 94 U. S., 113, and lias been reiterated in numerous eases since, collected 9 Nose’s Notes, pp. 21-55. Hie doctrine is thus stated in People v. Budd, 117 N. Y., 5 L. R. A., 566, 15 Am. St., 460; “Common carriers exercise a sort of public office and have duties to perform in which the public is interested. Navigation Co. v. Bank, 6 How., 382. Their business is therefore affected with a public interest within the meaning of the doctrine which Lord Hale has so forcibly stated. But we need go no further. Enough has already been said to show that when private property is devoted to a public use it is subject to public regulation.”

This has been repeated over and over again in all the courts. Citation of authorities would be a work of supererogation. If the public can regulate the charges of a common carrier, so that only it is not deprived of all profits, as is held in Wellman v. Railroad, 143 U. S., 339, and Dow v. Beidelman, 125 U. S., 680, it can certainly require a connection for the accommodation of thousands of our people even if, at the utmost, it requires a loss of fifteen dollars a day out of a railroad company making $2,000,000 net earnings annually out of its operation in this State.

It is not necessary that the particular service required shall be profitable if the total earnings in this State show a profit. It is precisely because some particular service, which the public comfort or convenience may require, is not profitable that the company declines to render it. It prefers to work the soft spots, the best paying ore only, and it is precisely for that reason that the Commission is vested with the power to require those things to be don© if reasonable and just (not necessarily profitable) as to which there is the protection of an appeal to the Superior Court and a. further review here.

In Railroad v. Gill, 156 U. S., 664, the Court, affirming the Supreme Court of Arkansas in same ease (54 Ark., 112), says that the common carrier cannot “attack as unjust a regulation which fixes a rate at which some part would be unremunerative. * * * To the extent that the question of injustice is to be determined by the effects of the act upon the earnings of the company, the earnings of the entire line must be estimated.” In Railroad v. Minnesota, 186 U. S., 261, the Court says that if upon the whole operations in hauling coal the road makes a profit, the requirement as to a fair profit upon investment is satisfied notwithstanding under the order of the Commission there would be a loss in hauling at the rate fixed in car-load lots. In Railroad v. Minn., supra, the Court say: “We do not think it beyond the power of the State Commission to reduce the freight upon a particular article, provided the companies are able to earn a fair profit upon their entire business, and the burden is upon them to impeach the action of the Commission in this particular.” In Cantwell v. railroad, 176 Ill., 512, tire Supreme Court of Illinois laid down the same doctrine thus: “The sufficiency of the earnings of a railroad to justify the expense of running a separate passenger train over a certain branch line constituting part of the entire system is not to be determined by considering the profits of that branch alone, but of the whole business of the various parts of the roads operated with the branch as one continual line.” In Railroad v. Commission of La., 33 So., 214, the Supreme Court of that State, through Nichols, C. J., in defining the powers possessed by the Railroad Commission, says: “They extend to matters concerning public comfort and convenience, and in the consideration of matters of comfort and convenience the number of persons who may be concerned or interested in some particular matter at some particular point enter as important factors in determining wbat is to be clone. The Commission cannot ignore tbe comfort and convenience of numbers of citizens on a line of travel or conveyance to base their action exclusively upon a consideration of the amount of dollars and cents which may be involved. * * * In the present issue it cannot be claimed that the Southern Pacific road, either in the operation of its line as a whole or that part of it which falls within the limits of Louisiana has not been and is not remunerative; nor can it be said that the Morgan Eailroad Company is not a paying corporation. * * * We do not think the point is made that after the business of the railroad corporation had made it fairly remunerative, the Commission is without general authority to direct that a portion of the ‘surplus’ profits (if that expression can be used) should he applied to the promotion of the comfort and convenience of the people along the line of road. When such a point in the business of the road is reached, the rights of the ‘general public’ come clearly in view.”

In U. S. v. Freight Asso., 166 U. S., 322, the Court says: “It must also be remembered that railways are corporations organized for public purposes, have been granted valuable franchises and privileges (and among such the right to take private property of citizens is not the least), and that they all primarily owe duties to the public of a higher nature even than that of earning large dividends for their shareholders.” In Gladson v. Minn., 166 U. S., 430, the Court says: “The State which created the corporation may make all needful regulations of a police character for the government of the company while operating its road within the jurisdiction; it may prescribe the location and the plan of construction of the- road and the rate of speed at which the trains shall run- and the places at which they shall stop, and may make any other reasonable regulations for their management in order to secure the object of its incorporation and the safety, good order, convenience and comfort of its passengers and of the public.” In Wisconsin v. Jacobson, 179 U. S., the Court says: “That railroads from the very outset have been regarded as public highways, and the right and duty of the government to regulate, in a reasonable and proper manner, the conduct and business of a railroad corporation have been founded upon that fact. Constituting public highways of a most important character, tire functions of proper regulation by the government spring from the fact that in relation to all highways the duty of regulation is governmental in its nature. At the present day there is no denial of these propositions. -The companies hold a public franchise and governmental supervision is therefore valid. They are organized for the public interests and to subserve primarily the public good and convenience.”

It is needless to multiply authorities. As the United States Supreme Court says in the last-cited case, the defendant was granted incorporation by the State “to subserve primarily the public good and convenience.” If all those things required for the public convenience or comfort were profitable per se to the company, a Corporation Commission would not be necessary to compel the adoption and operation of such betterments. In Water-works v. Schottler, 110 U. S., 347, it was held that the Legislature may regulate gas and water and other like companies, and requires them to furnish their customers at prices to be fixed by the municipal authorities of the locality, and in Railroad v. Bristol, 151 U. S., 556, that the Legislature could require, even as to railroads already built, the removal of grade crossings at railroad expense. Certainly, then, the police power extends to authorizing the State Corporation Commission to require two railroad companies to malee connection. The Corporation Commission, after three several investigations, has found that this connection would subserve that end. Tbe jury, after an overwhelming array of evidence which we have not deemed it necessary to recapitulate or cite, has so* found. The statute clearly gives the power, and the authorities are beyond question that the Legislature could confer it. Requiring two railroads to make connection is the exercise of a far less, power than making rates or compelling the erection of union depots at such junctions.

While we must reverse the decision below and affirm the judgment of the Corporation Commission, in view of the novelty and importance of this class of litigation, it is well to take notice of some of the- exceptions taken by the Commission.

It was error to direct a verdict upon the first four issues. Upon tire first issue, whether it was practicable to make connection by train No. 39, and the second issue, whether it was practicable to make connection by extending the run of the Plymouth train to Selma, there was a conflict of evidence, and the issues were of fact, and (if material) should have been submitted to the jury. More especially was this time since the order of the Commission was presumed to be valid and the burden was on the defendant to show otherwise. Railroad v. Minn., 186 U. S., 264. On tbe third issue, as to the practicability of running tbe Springhope train to Selma in tbe four hours that'it lies over at Rocky Mount, the evidence was uncontradicted that this could be done, and there was even evidence from two reputable witnesses which proved (if believed by the jury) that the costs of the extra run would be only ten dollars, showing a profit of fifteen dollars daily. The excuse that the engine was used for shifting at Rocky Mount, or that being a wood-burner, a small stand for wood would need to be built at Selma- — -the other engines being coal-burners — did not deserve to- be considered against the inconvenience to thousands of the public caused by failure to make this connection. It follows that it was error to instruct the jury in response to- the fourth issue to- find that the connection could only be made by an additional train from Rocky Mount to Selma.

The first seven issues were irrelevant and immaterial. The motion of tire plaintiff for judgment upon the verdict should have been granted. The eighth issue, “Is it reasonable and proper that for the convenience of the traveling public the defendant company should be required to make such connection?” was answered “Yes.” This was the only material issue, and upon that finding alone the judgment should be entered here. This view is strengthened by the “inspection of tire whole! record,” which shows that the findings' upon the sixth and seventh issues are that if the connection were made by the most expensive of the four methods named, the loss was only fifteen dollars per day, and the report of the defendant to the Corporation Commission, which, is in tire record, that its annual net earnings in this State were nearly two millions of dollars. This shows the correctness of the finding upon the eighth issue as to the reasonableness of the order, even in the most adverse view.

The Court has the power to enter final judgment here, and on proper occasions has done so. The Code, see. 957; Alspaugh v. Winstead, 79 N. C., 526; Griffin v. Light Co., 111 N. C., 438; Cook v. Bank, 130 N. C., 184. Final judgment has been entered here, not infrequently, by order and without opinion as a matter of course. In Bernhardt v. Brown, 118 N. C., 710, 36 L. R. A., 402, it is said: “If this Court reverses or affirms thei judgment below, it may in its discretion enter a final judgment here or direct it to be so entered below. By preference, and as a matter of convenience, the latter course is, unless in very exceptional eases, the course pursued, especially since the Act of 1881, chap. 192.” In Caldwell v. Wilson, 121 N. C., 473, which resembles this case in being a matter of public interest and not a judgment for money, it was held “the judgment must therefore be affirmed, but in view ox the public interests involved, we deem it proper not to remand the case but to enter final judgment in this Court,” which was done — ousting- the defendant from the office and seating- the relator. Among many other cases in which final judgments were entered hea-e, is White v. Auditor, 126 N. C., 584, and similar cases, in none of which the dissents were upon the power of this Court to enter final judgment here. The Code, sec. 957, provides as to this Court: “In every case the Court may render such sentence, judgment an'd decree as on inspection of the whole record it shall appear to them ought in law to be rendered thereon.” Rule 49 of this Court provides for “A judgment docket of this Court” with references to entries as to different causes of action in which recovery is adjudged, and Rules 50 and 51 for the issuance of executions from this Court on its judgments.

In this matter there has already been a year’s delay. The inconvenience to the public continues each day. The act of the Legislature for that reason expedites the hearing of these causes by giving them precedence of all other civil eases. Judgment will therefore be entered here reversing the judgment of the Superior Court, and affirming in all respects and declaring valid tire order of the Corporation Commission made in this case, February 13, 1904. That order simply directed the defendant to make the connection daily at Selma at the time mentioned therein, without specifying whether this should be done by quickening the speed of train No. 39 or by extending the run of the Springhope or the Plymouth train, or by putting on an extra train from Rocky Mount to Selma, and our judgment leaves to the defendant the same liberty of choice as to the mode in which it shall put into effect the order of the Commission. 0>wing to the possible necessity of making preparations to comply with this judgment, there will be a cessat executio till February 10, 1905, entered on the judgment docket of this Court, and until that date no mandate shall issue to the defendant upon this judgment. The judgment of the Superior Court is

Reversed.

---

Concurrence Opinion

Douglas, J.,

concurring. I fully concur in the opinion of the Court; b.ut there is a question omitted therefrom which, though perhaps not essential to the present decision of the Court, may become of the greatest importance in view of the Federal question raised, or attempted to be raised, by the defendant. I think there was error in excluding, upon the objection of tire defendant, answers to the following questions asked by the plaintiff, to-wit:

“Q. Mr. Borden, what is the stock of the Atlantic Coast Line worth to-day?” “Q. What was the stock of the Wilmington and Weldon Railroad Company worth twenty years ago ?” “Q. Is not the present value of the original stock of the Wilmington and Weldon Railroad Company, which constituted the balsis of the present stock of the Atlantic Coast Line, today worth $1,900' or $2,000 in the market?” “Q. What dividends are now being received by the holders of the original stock of tlie Wilmington and Weldon Railroad Company?” (Record, p. 294).

The questions sufficiently disclose the scope of the proposed enquiry, but would doubtless have been followed by other questions eliciting in greater detail the desired information. In its second exception to the order of the Commission, the defendant claims the protection of the Constitution of the United States in the following words: “The company, therefore, excepts to the order of the Commission in so' far as it is construed as requiring it to run an additional train from Rocky Mount to Selma between the hours above named, because to do so would be requiring the company to perform services without compensation to it for the same, and thereby taking its property without due process of law, and in violation of the Constitution of this State, and in violation of the Constitution of the United States.” (Record, p. 32). In its brief the defendant also says: “Neither the Commission nor the Legislature has the power to require the defendant to run an additional train a.t a loss. The jury finds that to operate this train will impose a daily loss of fifteen dollars upon the defendant, and to compel the defendant to operate this train at a loss would be taking its property without compensation and in violation of the Constitution of this State and of the Constitution of the United States.”

In this view of the case the excluded testimony might become of the utmost importance. We cannot presume that the Corporation Commission intends “to take the property of the defendant without due process of law” or to require unnecessary services without compensation in^ some form or another; but we cannot admit that the defendant can ignore the just demands of the public by creating for its own profit and convenience a condition of affairs that makes one train unprofitable by throwing all the remunerative business on trains that do not make connection. The order of the Commission does not require tire defendant to run an additional train, but simply to make connection. It does not necessarily require any additional, unusual or special services, but simply the performance of its essential duties in such a manner as will meet the reasonable convenience of the public. This the defendant can do by making a, through train arrive at Selma a few minutes earlier; but if it prefers to ignore the rights, of those living along its line, whose lands it has taken through the exercise of the right of eminent domain, in order to cater to- its through travel, it cannot justly complain if its public duties require the running of an extra train. The mere fact that through passengers from the North to Florida have the choice of three or more routes, varying but little in time and comfort, is no excuse for an unjust discrimination against that part of the traveling public who are dependent upon local lines. This idea was evidently in the mind of this Court, when, speaking by Rodman, J., in Branch v. Railroad, 77 N. C., 347, upon the necessity for the imposition of penalties, it says on page 350': “The Legislature considered the common law liability as insufficient to compel the performance of the public duty. It must have thought that the interest of local shippers, for whose interest principally the road was built, and against whom the company had a complete monopoly, were being sacrificed by wanton delays of carriage in order that the company might obtain the carriage from points where there were, competing lines by land or water — as from Wilmington to Augusta.” The fact that the defendant in that case was the parent of the present defendant may lend additional significance to the words of the Court.

In this view the profits of the road, both for the present and tire immediate past, would become material. Suppose the witness had answered that no dividend had been paid for years, and that the company was unable to earn anything beyond bare expenses, whereby the stock was almost unmarketable, would it not bave been competent as tending to prove tbe defendant’s contention that it is unreasonable to demand of it any additional service ? On the contrary, suppose tbe witness bad testified as follows.: That on one share of tbe par value of one hundred dollars in tbe Wilmington and Weldon Eailroad Company, tbe following stock dividends or bonuses bad been issued in addition to large annual dividends; that in 1887 tbe said railroad company bad issued upon this one share of stock as a bonus a certificate of indebtedness in tbe sum of one hundred dollars bearing seven per cent interest; that in 1900 there were issued in lieu of this one share of stock, two shares of one hundred dollars each of preferred stock in tbe Atlantic Coast Line Company and two shares of one hundred dollars each of common stock in the Atlantic Coast Line Company; that in 1897 there was also issued to the holder of the one original share of stock four shares of the Atlantic Cbast Line Company of Connecticut of one hundred dollars each, and in 1900 a certificate of indebtedness of the Atlantic Coast Line Company of Connecticut for four hundred dollars; that all of said stock and certificates of indebtedness were much above par value and receiving handsome dividends; that recently a dividend of twenty-five per cent, had been declared, and that the one original share in the Wilmington and Weldon Eailroad Company had thus developed into thirteen shares of stock and certificates of indebtedness of the par value of $1,300 but of the real value of about $2,500. Suppose it had been further shown that a little over thirty year's ago the State’s half interest in the Wilmington and Weldon Eailroad Company had been bought for thirty-five dollars a share. Suppose further that it was shown that a large part of the alleged indebtedness of the company were certificates of indebtedness issued to the stockholders without any consideration whatever other than the mere capitalization of profits.

Would not this evidence bave been competent to prove that the order of the Corporation Commission requiring the defendant to quicken its regular train twenty-five minutes in order to make connection at Selma was not unreasonable; and not “talcing its property without due process of law and in violation of the Constitution of the United States ?” Would not such evidence also tend to prove that it would not be unreasonable to- require the defendant to make such connection even if it did require an extra train at a loss of fifteen dollars per day, if other trains running on the same line of road and by the same places more than made up the difference ?

These are hypothetical answers on both sides. Where the truth may be was peculiarly within the knowledge of the defendant upon whose objection it was excluded. It cannot be contended that such an investigation would be an impertinent inquisition into' private affairs, as property taken for a public purpose under the power of eminent domain is indelibly impressed with a public use. This has been too often decided by the Supreme Court of the United States to be any longer an open question. Two cases will be sufficient for my purpose. In Railroad Co. v. Wellman, 143 U. S., 339, the Court says, on page 345 : “A single- suggestion in this direction: It is agreed that the defendant’s operating expenses for 1888 were $2,404,516.54. Of what do these operating expenses consist ? Are they made up partially of extravagant salaries; fifty to one hundred thousand dollars to the president, and in like proportion to subordinate officers? Surely, before the courts are called upon to adjudge an act of the Legislature fixing the maximum passenger rates for railroad companies to be unconstitutional, on the ground that its enforcement would prevent the stockholders from receiving any dividends on their investments, or the bondholders any interest on their loans, they should be fully advised as to what is done with the receipts and earnings of the company; for if so advised it might clearly appear that a prudent and honest management would within the rates prescribed secure to the bondholders their interest, and to the stockholders reasonable dividends. While the protection of vested rights of property is a supreme duty of the courts, it has not come to this that the legislative power rests subservient -to the discretion of any railroad corporation which may, by exorbitant and unreasonable salaries, or in some other improper way, transfer its earnings into what it is pleased to' call 'operating expenses.’ ”

The Corporation Commission Act (chap. 164, Laws 1899), in section 2 provides as follows: “Provided, that in fixing any maximum rates or charge or tariff of rates or charges for any common carrier, person or corporation subject to the provisions of this act, the said Commission shall take into consideration if proved or may require proof of the fair value of the property of such carrier, person or corporation used for the public in the consideration of such rate or charge or the fair value of the service rendered as in determining the fair value of the property so being used for the convenience of the public. It shall furthermore consider the original cost of the construction thereof and the amount expended in permanent improvements thereon and the present compared with the original cost of construction of all its property within the State of North Carolina; the probable earning capacity of such property under the particular rates proposed and the sum required to meet the operating expenses of such carrier, person or corporation, and all other facts that will enable them to determine what are reasonable and just rates, charges and tariffs.”

The ease of Cotting v. Stockyards Co., 183 U. S., 79, is cited by the defendant; but does not seem to sustain its contentions. In the opinion in that case appears the following dear distinction between those corporations which, like railroad and telegraph companies, are created for a public purpose, and endowed with certain governmental powers, such as that of eminent domain, and those corporations which are only incidentally devoted to public use, receiving no governmental powers and not impressed with any permanent public purpose. The Court says, on page 93: “Now, in the light of these decisions and facts, it is insisted that the same rule as to the limit of judicial interference must apply in cases in which a public service is distinctly intended and rendered and in those in which without any intent of public service the owners have placed their property in such a position that the public has an interest in its use. Obviously there is a difference in the conditions of "these cases. In the one the owner has intentionally devoted his property to the discharge of a public service. In the other he has placed his property in such a position that, willingly or unwillingly, the public has acquired an interest in its use. In the one he deliberately undertakes to do that which is a proper work for the State. In the other, in pursuit of merely a private gain, he has placed his property in such a position that the public has become interested in its use. In the one it may be said that he voluntarily accepts all the conditions of public service which attach to like service performed by the State itself. In the other, that he submits to only those necessary interferences and regulations which the public interests require. In the one he expresses hi willingness to do the work of the State, aware that the State in the discharge of its public duties is not guided solely by a question of profit. It may rightfully determine that the particular service is of such importance to the public that it may be conducted at a pecuniary loss, having in view a large general interest. At any rate, it does not perform its services with the single idea of profit. Its thought is the general public welfare. If in such a case an individual is willing to undertake tbe work of tbe State, may it not be urged that he in a measure subjects himself to the same rules of action, and if the body which expresses the judgment of the State believes that the particular services should be rendered without profit he is not at liberty to complain? While we have said again and again that one volunteering to do such services cannot be compelled to expose his property to confiscation, that he cannot be compelled to submit its use to such rates as do not pay the expenses of the work, and therefore create a constantly increasing debt which ultimately works its appropriation, still is there not force in the suggestion that as the State may do the work without profit, if lie voluntarily undertakes to act for the State he must submit to a like determination as to the paramount interests of the public? Again, wherever a purely public use is contemplated the State may, and generally does, bestow upon the party intending such use some of its governmental powers. It grants the right of eminent domain by which property can be taken, and taken not at the price fixed by the owner, but at the market value. It thus enables him to exercise the powers of the State, and exercising those powers and doing the work of the State, is it wholly unfair to rule that he must submit to the same conditions which the State may place upon its own exercise of the same powers and the doing of the same work ? It is unnecessary in this case to determine 'this question. We simply notice the arguments which are claimed to justify a difference in the rule as to property devoted to public uses from that in respect to property used solely for purposes of private gain, and which only by virtue of the conditions of its use becomes such as the public have an interest in. In reference to this latter class of cases, which is alone the subject of the present inquiry, it must be noticed that the individual is not doing the work of the State. He is not using his. property in the discharge of a purely public service. Pie acquires from the State none of its governmental powers. His business in all matters of purchase and. sale is subject to the ordinary conditions of the market and the freedom of contract.”

Case Details

Case Name: Corporation Commission v. Railroad

Court Name: Supreme Court of North Carolina

Date Published: Dec 13, 1904

Citation: 49 S.E. 191

Court Abbreviation: N.C.