Nos. 7,427 and 7,453 | U.S. Circuit Court for the District of Kansas | Oct 28, 1897
These cases have beeu before this court on two previous occasions — First, on an application for a preliminary injunction; and, second, on a motion to continue tlie injunction. 79 F. 679" court="None" date_filed="1897-04-12" href="https://app.midpage.ai/document/cotting-v-kansas-city-stock-yards-co-9307598?utm_source=webapp" opinion_id="9307598">79 Fed. 679; 82 F. 839" court="None" date_filed="1897-10-04" href="https://app.midpage.ai/document/cotting-v-kansas-city-stock-yards-co-9307767?utm_source=webapp" opinion_id="9307767">82 Fed. 839. The nature of the litigation, and the questions involved therein, have therefore become well known, and are familiar to the bar. For these reasons it does not seem necessary on the present occasion to do more than announce in a succinct form the conclusions which have been readied on the points in controversy.
1. The property of the Kansas City Stock-Yards Company located in Kansas City, Kan., and Kansas City, Mo., which is used for yard-ing, feeding, wittering, and weighing cattle, has, by the voluntary ad; of the corporation which owns the same, become affected with a public use, and is therefore subject to legislative control, state or national, to the extent, at least, that the proper legislative body may prescribe a maximum rate of compensation to be charged for the services rendered at said yards in caring for live stock. The public have a greater interest in said property, and in the management thereof, than in other private property, because it is located in a large city, at the junction point of many lines of railroad, which radiate there
2. While much business is transacted at the Kansas City stock yards, consisting in the purchase and sale of live stock shipped to that market from other states than Kansas, which is interstate business, yet it is doubtful whether the stock-yards company itself is engaged in interstate commerce. It neither buys nor sells cattle or other animals. Its business consists in yarding, feeding, watering, and weighing live stock for its customers. It also loads and unloads stock from cars, but in this latter respect it acts merely as employé of the various railroad companies, from whom alone it receives compensation for such services. The claim of the stock-yards company that it is engaged in interstate commerce derives no additional support from the accidental location of its yards on the boundary line between two states. The inherent character of the business which it transacts, as above described, is not changed by the fact that its yards are located partly in Kansas and partly in Missouri, and that it herds cattle on both sides of the line, and drives them, while in its custody, to and fro across the line, to suit its own convenience, or the convenience of its customers. This shifting of live stock from one side of the state line to the other, within its own yards, and for its own convenience, is not interstate commerce, within the proper meaning of that phrase. Conceding, however, but without deciding, that the business in which the stock-yards company is engaged is so intimately related to interstate business transacted in its yards by other persons that congress might lawfully -prescribe a maximum rate of charges for yarding and feeding cattle shipped thereto from other states than Kansas, still the court is of the opinion that this power to fix a limit to such charges is not of such an exclusive character as to prevent the state of Kansas from exercising a similar povvr, in
3. The important question presented by these cases, and the only question which is not foreclosed by controlling authority, is whether the maximum rates prescribed by the Kansas statute for yarding and feeding live stock are reasonable, or in their nature confiscatory. If confiscatory, the act, or so much thereof as prescribes rates, is void, by the provisions of the fourteenth amendment of the federal constitution, which prohibits a state from taking property “without due process of law,” or denying “to any person within its jurisdiction the equal protection of the laws.” Railroad Commission Cases, 116 U.S. 307" court="SCOTUS" date_filed="1886-01-04" href="https://app.midpage.ai/document/stone-v-farmers-loan--trust-co-91532?utm_source=webapp" opinion_id="91532">116 U. S. 307, 331, 6 Sup. Ct. 334, 348, 349, 388, 391, 1191; Reagan v. Trust Co., 154 U.S. 362" court="SCOTUS" date_filed="1894-05-26" href="https://app.midpage.ai/document/reagan-v-farmers-loan--trust-co-93947?utm_source=webapp" opinion_id="93947">154 U. S. 362, 399, 14 Sup. Ct. 1047. A prime factor in determining whether the prescribed rates are reasonable or confiscatory is the valuation which shall be placed on the property of the stock-yards company, which is used for the purpose of yarding and feeding stock. With reference to -that subject, it may be said that different methods of estimating the value of property may properly be
4. The value of the properly used for stock-yards purposes, as fixed by the master, including the value of certain supplies of feed and other materials which were on hand December 31,1896, is $5,388,003. The gross income realized by the stock-yards company during the .year 1896. which may be taken as representing its average gross income, was $ 1,012,271.22. The total expenditures of the company for all purposes during the same period amounted to $535.297.14, which would indicate a net income for the year of $476,984.08. A controversy arises, however, as to the nature of some of the expenditures for that year. It is claimed on the one hand, but denied on the other, that the operating expenses for the year 1896, such as may. properly be charged to the profit and loss account, a,mounted to $363,712.49, instead of $535,297.14: the difference between the two amounts, $109,584.05. consisting of money which was expended in making new and permanent improvements, which added by that amount to the value of the property, and for that reason should not be treated as operating expenses, in computing the net profits. With respect to this contention the court has reached the following conclusion: A very large part of the sum last mentioned (all of it, in fact, except, about $6,000) was expended in building new structures and making permanent improvements, which increased the value of the company’s property to the extent of such expenditures, find therefore cannot be regarded as operating expenses, in estimating the net profits. Tin: company itself took that view of the question, by charging them to construction account; and in due season it would doubtless have, capitalized the amount of such expenses by issuing stock therefor, as it had previously capitalized other expenses of a similar character. At the same time, as buildings, pens, pavements, and other similar structures deteriorate in value somewhat from year to year, even where they are repaired in the ordinary way, it is eminently proper, in estimating the net i>rofits, to set aside annually out of the gross income a certain sum to cover such depreciation. The testimony does not show with any great degree of accuracy what sum should be thus
5. Conceding, as we must, that the legislation complained of was radical in its nature and effect, that it reduced the company’s income about 50 per cent., and that it prevents it from realizing on the capital invested in its plant such a per cent, as is ordinarily realized on capital investee in other mercantile and business enterprises, still the court is not prepared to hold that the statute is confiscatory, and that it deprives the company of its property without due process of law. It is common knowledge that large sums of money are invested in securities which do not yield a return exceeding 5 per cent, on the investment, and it is further manifest that the business of the stockyards company, as conducted, is not subject to the same risks of loss from bad debts and declining prices which affect many other business enterprises. Moreover, legislative enactments cannot be declared void because the courts entertain doubts of their expediency or validity, or because such enactments tend to lessen the valuation which has theretofore been placed on certain private property. In a great variety of ways, laws which cannot be challenged have an inevitable tendency to affect injuriously the value of property. The power of the state to fix the maximum price that shall be charged for the use of property affected with a public interest necessarily implies the power to lessen its value somewhat, or at least to lessen it as measured by the income which it might be made to produce if free from' public control. In the very nature of things, considerable scope must be given to legislative discretion in determining the validity of statutes like the one now in question, since the judiciary have no power to prescribe a schedule of maximum rates, and it is only where there has been a clear abusé of power, — where the rates prescribed by a statute are manifestly unreasonable, and operate,to deprive a citi
6. The great importance of the questions involved in these cases will doubtless occasion an appeal to the supreme court of the United States, where they will be finally settled and determined. If, on such appeal, the Kansas statute complained of should be adjudged invalid for any reason, and in the meantime the statutory schedule of rates should be enforced, the stock-yards company would sustain a great and irreparable loss. Under such circumstances, as was said, in substance, by the supreme court in Hovey v. McDonald, 109 U.S. 150" court="SCOTUS" date_filed="1883-11-05" href="https://app.midpage.ai/document/hovey-v-mcdonald-90915?utm_source=webapp" opinion_id="90915">109 U. S. 150, 161, 3 Sup. Ct. 136, it is the right and duty of the trial court to main tain, if possible, the status quo pending an appeal, if the questions at issue are involved in doubt; and equity rule 93 was enacted in recognition of that right. The court is of opinion that the cases at bar are of such moment, and the questions at issue so balanced with doubt, as to justify and require an exercise of the power in question. Therefore, although the bills will be dismissed, yet an order will ai the same time be entered restoring and continuing in force the injunction which was heretofore granted, for the term of 10 days, and if, in the meantime, an appeal shall be taken, such injunction will be continued in force until the appeal is heard and determined in the supreme court of the United States: provided that, in addition to the ordinary appeal bond, the Kansas City Stock-Yards Company shall make and file in this court its bond in the penal sum of $200,000, payable to the clerk of this court and his successors in office, for the benefit of whom it may concern, conditioned that, in the event tlx1 decree dismissing the bills is affirmed, it will, on demand, pay to the party or parties entitled thereto all overcharges for yarding and feed ing live stock at its stock yards in Kansas City, Kan., and Kansas City, Mo., which it may have exacted in violation of sections 4 and 5 of the Kansas statute relative to stock yards, approved March 3,1897, since an injunction was first awarded herein, to w7it, on April-- — . 1897, and that it will in like manner pay such overcharges, if any, as it may continue to exact in violation of said statute during the pen-dency of the appeal; said obligation to become void if the statute in question shall be pronounced invalid by the supreme court.