Smyth v. AmesSmyth v. Ames
The first question to be considered is one common to all the cases. While it was not objected at the argument that there had been any departure from the 94th Equity Rule, it was contended that the plaintiffs had an adequate remedy at law, and that the Circuit Court of the United States, sitting in equity, was therefore without jurisdiction. This objection is
We cannot accept this view of the equity jurisdiction of the Circuit Courts of the United States. The adequacy or inadequacy of a remedy at law for the protection of the rights of one entitled upon any ground to invoke the powers of a Federal court, is not to be conclusively determined by the statutes of the particular State in which suit may be brought. One who is entitled to sue in the Federal Circuit Court may invoke its jurisdiction in equity whenever the established principles and rules of equity permit such a suit in that court; and he cannot be deprived of that right by reason of his being allowed to sue at law in a state court on the same cause of action. It is true that an enlargement of equitable rights arising from the statutes of a State may be administered by the Circuit Courts of the United States. Case of Broderick‘s Will, 21 Wall. 503, 520; Holland v. Challen, 110 U.S. 15, 24; Dick v. Foraker, 155 U.S. 404, 415; Bardon v. Land & River Imp. Co., 157 U.S. 327, 330; Rich v. Braxton, 158 U.S. 375, 405. But if the case in its essence be one cognizable in equity, the plaintiff — the required value being in dispute — may invoke the equity powers of the proper Circuit Court of the United States whenever jurisdiction attaches by reason of diverse citizenship or upon any other ground of Federal jurisdiction. Payne v. Hook, 7 Wall. 425, 430; McConihay v. Wright, 121 U.S. 201, 205. A party by going into a national court does not, this court has said, lose any right or appropriate remedy of which he
In these cases the plaintiffs, stockholders in the corporations named, ask a decree enjoining the enforcement of certain rates for transportation upon the ground that the statute prescribing them is repugnant to the Constitution of the United States. Under the principles which in the Federal system distinguish cases in law from those in equity, the Circuit Court of the United States, sitting in equity, can make a comprehensive decree covering the whole ground of controversy and thus avoid the multiplicity of suits that would inevitably arise under the statute. The carrier is made liable not only to individual persons for every act, matter or thing prohibited by the statute, and for every omission to do any act, matter or thing required to be done, but to a fine of from one thousand to five thousand dollars for the first offence, from five thousand to ten thousand dollars for the second offence, from ten thousand to twenty thousand dollars for the third offence, and twenty-five thousand dollars for every subsequent offence. The transactions along the line of any one of these railroads, out of which causes of action might arise under the statute, are so numerous and varied that the interference of equity could well be justified upon the ground that a general decree, according to the prayer of the bills, would avoid a multiplicity
Another question of a preliminary character must be here noticed. The answer of the officers of the State in each case insists that the real party in interest is the State, and that these suits are, in effect, suits against the State, of which the Circuit Court of the United States cannot take jurisdiction consistently with the Eleventh Amendment of the Constitution of the United States. This point is, perhaps, covered by the general assignments of error, but it was not discussed at the bar by the representatives of the State Board. It would therefore be sufficient to say that these are cases of which, so far as the plaintiffs are concerned, the Circuit Court has jurisdiction not only upon the ground of the diverse citizenship or alienage of the parties, but upon the further ground that, as the statute of Nebraska under which the State Board of Transportation proceeds is assailed as being repugnant to rights secured to the plaintiffs by the Constitution of the United States, the cases may be regarded as arising under that instrument. But to prevent misapprehension, we add that, within the meaning of the Eleventh Amendment of the Constitution, the suits are not against the State but against certain individuals charged with the administration of a state enactment, which, it is alleged, cannot be enforced without violating the constitutional rights of the plaintiffs. It is the settled doctrine of this court that a suit against individuals for
An important question is presented that relates only to the Union Pacific Company. That company is a corporation formed by the consolidation of several companies under the authority of acts of Congress, one of the constituent companies being the Union Pacific Railroad Company incorporated by the act of July 1, 1862, c. 120, 12 Stat. 489. United States v. Union Pacific Railway, 160 U.S. 1, 6. Neither that company nor the Union Pacific Railroad Company is named in the Nebraska statute, but the statute is interpreted by the State Board of Transportation as embracing the present defendant corporation. It is contended that the State is without power to fix or limit the rates that the Union Pacific Company may charge for the transportation of freight on its lines between points within Nebraska. This contention rests: 1. Upon the provisions of the acts of Congress showing that the Union Pacific Railroad Company was created for the accomplishment of national objects, namely, to secure the safe and speedy transportation of the mails, troops, munitions of war and public stores of the United States; 2. Upon the eighteenth section of the above act of July 1, 1862, 12 Stat. 489, 497, c. 120, providing that “whenever it appears that the net earnings of the entire road and telegraph, including the amount allowed for services rendered for the United States, after deducting all expenditures, including repairs and the furnishing, running and managing of said road, shall exceed ten per centum upon its cost, exclusive of the five per centum to be paid to the United States, Congress may reduce the rates of fare thereon, if unreasonable in amount, and may fix and establish the same by law.” The argument is that Congress by this enactment has reserved to itself exclusive control of rates, interstate and local, to be charged on the Union Pacific Railroad. As this view, if maintained, would require
In Reagan v. Mercantile Trust Co., 154 U.S. 413, 416, the question arose whether the Texas and Pacific Railway Company, a corporation organized under the laws of the United States, was subject to the laws of Texas with respect to rates for transportation wholly within that State. The ground upon which exemption from state control was there asserted by the company was that it received all its franchises from Congress, including the franchise to charge and collect tolls. This court, conceding, for the purposes of that case, that Congress had power to remove the corporation in all its operations from state control, held that the act creating it did not show an intention upon the part of Congress to exempt it from the duty to conform to such reasonable rates for local transportation as the State might prescribe, and that the enforcement by the State of reasonable rates for such transportation would not disable the corporation from performing the duties and exercising the powers imposed upon it by Congress. The court said: “By the act of incorporation Congress authorized the company to build its road through the State of Texas. It knew that, when constructed, a part of its business would be the carrying of persons and property from points within the State to other points also within the State, and that in so doing it would be engaged in a business, control of which is nowhere by the Federal Constitution given to Congress. It must have been known that, in the nature of things, the control of that business would be exercised by the State, and if it deemed that the interests of the nation and the discharge of the duties required on behalf of the nation from this corporation demanded exemption in all things from state control, it would unquestionably have expressed such intention in language whose meaning would be clear. Its silence in this respect is satisfactory assurance that, in so far as this corporation should engage in business wholly within the State, it intended that it should be subjected to the ordinary control
This conclusion, as may be observed from the opinion, was based in part upon the reasoning in Thomson v. Pacific Railroad, 9 Wall. 579, and in Railroad Company v. Peniston, 18 Wall. 5, in which cases it was held that the property of certain railroad companies was not exempt from state taxation by reason alone of the fact that they were organized under acts of Congress for the accomplishment of national objects, and that the imposition of such taxes was not, in a constitutional sense, an obstruction to the exercise of the powers of the General Government, nor an interference with the discharge of the duties required of the companies by their charters.
In the present case the question is more difficult of solution by reason of the declaration in the above act of July 1, 1862 (no similar declaration being made in the act incorporating the Texas and Pacific Railway Company), that Congress may reduce the rates of fare on the Union Pacific Railroad if unreasonable in amount, and may fix and establish the same by law whenever the net earnings of the entire road and telegraph, ascertained upon a named basis, should exceed ten per centum upon its cost, exclusive of the five per centum to be paid to the United States.
Undoubtedly Congress intended by that act to reserve such power as was necessary to prevent the corporation from exacting rates that were unreasonable. But this is not equivalent to a declaration that the States through which the railroad might be constructed should not regulate rates for transportation begun and completed within their respective limits.
It cannot be doubted that the making of rates for transportation by railroad corporations along public highways,
We are now to inquire whether the Nebraska statute is repugnant to the Constitution of the United States.
By the
In Reagan v. Farmers’ Loan & Trust Co., 154 U.S. 362, 399, which involved the validity of certain rates for freights and passengers prescribed by a railroad commission established by an act of the legislature of Texas, this court, after referring to the above cases, said: “These cases all support the proposition that while it is not the province of the 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 rates, 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. There is nothing new or strange in this. It has always been a part of the judicial function to determine whether the act of one party (whether that party be a single individual, an organized body or the public as a whole) operates to divest the other party of any rights of person or property. In every constitution is the guarantee against the taking of private property for public purposes without just compensation. The equal protection of the laws which, by the
So, in St. Louis & San Francisco Railway v. Gill, 156 U.S. 649, 657, it was said 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 United States, as depriving the companies of their property without due process of law, and as depriving them of the equal protection of the laws.” In Covington & Lexington Turnpike Road Co. v. Sandford, 164 U.S. 578, 584, 594-5, 597, which involved the validity of a state enactment prescribing rates of toll on a turnpike road, the court said: “A statute which, by its necessary operation, compels a turnpike company, when charging only such tolls as are just to the public, to submit to such further reduction of rates as will prevent it from keeping its road in proper repair, and from earning any dividends whatever for stockholders, is as obnoxious to the Constitution of the United States as would be a similar statute relating to the business of a railroad corporation having authority, under its charter, to collect and receive tolls for passengers and freight.” And in Chicago, Burlington & Quincy Railroad v. Chicago, 166 U.S. 226, 241, it was held that “a judgment of a state court, even if it be authorized by statute, whereby private property is taken for the State or under its direction for public use, without compensation made or secured to the owner, is, upon principle and authority wanting in the due process of law required by the
In view of the adjudications these principles must be regarded as settled:
1. A railroad corporation is a person within the meaning of the
2. A state enactment, or regulations made under the authority of a state enactment, establishing rates for the transportation of persons or property by railroad that will not admit of the carrier earning such compensation as under all the circumstances is just to it and to the public, would deprive such carrier of its property without due process of law and deny to it the equal protection of the laws, and would therefore be repugnant to the
3. While rates for the transportation of persons and property within the limits of a State are primarily for its determination, the question whether they are so unreasonably low as to deprive the carrier of its property without such compensation as the Constitution secures, and therefore without due process of law, cannot be so conclusively determined by the legislature of the State or by regulations adopted under its authority, that the matter may not become the subject of judicial inquiry.
The cases before us directly present the important question last stated.
Before entering upon its examination, it may be observed that the grant to the legislature in the constitution of Nebraska
What are the considerations to which weight must be given when we seek to ascertain the compensation that a railroad company is entitled to receive, and a prohibition upon the receiving of which may be fairly deemed a deprivation by legislative decree of property without due process of law? Undoubtedly that question could be more easily determined by a commission composed of persons whose special skill, observation and experience qualifies them to so handle great problems of transportation as to do justice both to the public and to those whose money has been used to construct and maintain highways for the convenience and benefit of the people. But despite the difficulties that confessedly attend the proper solution of such questions, the court cannot shrink from the duty to determine whether it be true, as alleged, that the Nebraska statute invades or destroys rights secured by the supreme law of the land. No one, we take it, will contend that a state enactment is in harmony with that law simply because the legislature of the State has declared such to be the case; for that would make the state legislature the final judge of the validity of its enactment, although the Constitution of the United States and the laws made in pursuance thereof are the supreme law of the land, anything in the constitution or laws of any State to the contrary notwithstanding.
We turn now to the evidence in the voluminous record before us for the purpose of ascertaining whether — looking at the cases in the light of the facts as they existed when the decrees were rendered — the Nebraska statute, if enforced, would, by its necessary operation, have deprived the companies, whose stockholders and bondholders here complain, of the right to obtain just compensation for the services rendered by them.
The first and most important contention of the plaintiffs is that, if the statute had been in force during any one of the three years preceding its passage, the defendant companies would have been compelled to use their property for the public substantially without reward or without the just compensation to which it was entitled. We think this mode of calculation for ascertaining the probable effect of the Nebraska statute upon the railroad companies in question is one that may be properly used.
The conclusion reached by the Circuit Court was that the reduction made by the Nebraska statute in the rates for local freight was so unjust and unreasonable as to require a decree staying the enforcement of such rates against the companies named in the bill. Ames v. Union Pacific Railway, 64 Fed. Rep. 165, 189. That conclusion was based largely upon the figures presented by Mr. Dilworth, while he was a secretary of the State Board of Transportation, as well as a defendant and one of the solicitors of the defendants in these causes. He was a principal witness for that Board. His general fairness and his competency to speak of the facts upon which the question before us depends are apparent on the record. He stated that the average reduction made by the statute on all the “commodities of local rates” was 29.50 per cent; and this
In answer to questions propounded to him by the defendants constituting the State Board of Transportation, Mr. Dilworth stated that he had prepared himself with an estimate showing the number of tons of freight, commonly spoken of as local freight, hauled on the respective railways in Nebraska, and the amount received by the railway companies by way of tariff on tons of freight hauled, including through as well as local freight, and was qualified to speak as to the amount received by the companies for both passengers and freight within the State, and the reduction that would take place in rates under the statute in question. He presented various tables showing the results of his investigations. One is known as Exhibit 4, and is an “Estimate of local business, and the effect of House Roll 33” on the Burlington, St. Paul, Fremont, Union Pacific, Omaha, St. Joseph and Kansas City Companies for the year 1892. Another is called Exhibit 19, and is a like estimate in respect of the same companies for the years 1891 and 1893. Another is known as Exhibit 20, and shows “Tons carried, tonnage per mile and percentage of expenses for the years ending June 30, 1891, 1892 and 1893 (Nebraska).” These exhibits are as follows:
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| | | | | | Amount | |
| Number of | Average amount | Total amount | Total amount | Amount | received for | Total amount | Per cent of
1892. | tons hauled | received for | received for | of reduction | received from | freight hauled in | realized on all | reduction on all
| locally. | each ton hauled. | tons hauled | caused by | passenger | Nebraska including | business done | business done
| | | locally. | H.R. 33. | business. | through | in the State. | in the State
| | | | | | and local. | | by H.R. 33.
-------------------|-------------|------------------|--------------|--------------|---------------|--------------------|-----------------|-----------------
Burlington Co... | 574,653 | $2.15416 | $1,237,884 | $365,175 | $2,369,714 | $5,538,766 | $7,908,242 | .044
St. Paul Co... . | 65,762 | 1.87089 | 123,033 | 36,294 | 263,458 | 472,051 | 763,509 | .047
Fremont Co. ... | 158,350 | 2.12633 | 336,714 | 99,310 | 598,219 | 1,495,468 | 2,093,687 | .047
Union Pacific Co. | 192,865 | 2.06498 | 398,262 | 117,487 | 977,264 | 4,284,793 | 5,262,057 | .022
Omaha Co. ... . | 63,999 | 1.38026 | 88,335 | 26,043 | 305,668 | 955,626 | 1,261,294 | .022
St. Joseph Co... | 39,657 | .63051 | 31,004 | 8,836 | 71,083 | 216,395 | 287,478 | .030
Kansas City Co. . | 10,823 | .61261 | 6,630 | 1,889 | 41,123 | 125,530 | 166,653 | .011
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| | | | | | Amount | |
| Number of | Average amount | Total amount | Total amount | Amount | received from | Total amount | Per cent of
| tons hauled | received per | received per | of reduction | received from | freight carried | received on all | reduction on all
| locally. | each ton hauled. | ton [for tons] | caused by | passenger | in Nebraska including | business done | business done
| | | carried locally. | H.R. 33. | business. | local | in the State. | in the State
| | | | | | and through. | | by H.R. 33.
------------------|-------------|------------------|------------------|--------------|---------------|-----------------------|-----------------|-----------------
1891. | | | | | | | |
Burlington Co. . | 538,824 | $1.98 | $1,066,871 | $314,726 | $2,321,983 | $3,942,078 | $6,264,061 | .05
St. Paul Co. . . | 64,496 | 1.72 | 110,933 | 37,725 | 225,264 | 506,470 | 731,734 | .044
Fremont Co... . | 141,056 | 2.47 | 348,408 | 102,780 | 876,583 | 1,969,242 | 2,845,825 | .036
Union Pacific Co. | 152,028 | 1.83 | 278,211 | 82,072 | 1,509,331 | 3,791,849 | 5,301,108 | .015
Omaha Co... . . | 61,448 | 1.23 | 75,581 | 22,296 | 311,130 | 580,834 | 891,964 | .025
St. Joseph Co. . | 25,078 | .87 | 21,817 | 6,245 | 86,036 | 178,529 | 264,565 | .024
Kansas City Co. . | 8,743 | .77 | 6,732 | 1,985 | 41,837 | 67,946 | 109,783 | .018
| | | | | | | |
1893. | | | | | | | |
Burlington Co. . | 583,294 | 2.13 | 1,242,416 | 366,512 | 2,581,564 | 5,973,356 | 8,554,920 | .042
St. Paul Co. . . | 78,753 | 1.81 | 142,542 | 42,049 | 267,535 | 650,109 | 917,644 | .045
Fremont Co... . | 177,804 | 2.26 | 424,437 | 125,208 | 816,239 | 2,237,044 | 3,053,283 | .041
Union Pacific Co. | 220,061 | 1.88 | 413,714 | 122,045 | 1,551,877 | 4,313,204 | 5,865,081 | .020
Omaha Co... . . | 68,237 | 1.18 | 80,519 | 23,753 | 332,497 | 887,616 | 1,220,113 | .019
St. Joseph Co. . | 50,452 | .67 | 33,802 | 9,971 | 99,396 | 263,516 | 362,912 | .027
Kansas City Co. . | 15,485 | .61 | 9,445 | 2,786 | 41,667 | 135,824 | 177,491 | .015
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| | | | | | Total number |
| | Number of | Number of | Number of tons | Total number | of passengers, | Percentage
NAME OF ROAD. | Number of | tons of interstate | tons of local | of interstate | of tons, local and | local and interstate, | of expenses to
| tons carried | freight | freight carried | freight carried | interstate, | carried | earnings.
| locally. | carried. | 1 mile. | 1 mile. | carried 1 mile. | 1 mile. |
------------------------|--------------|--------------------|------------------|-----------------|--------------------|-----------------------|---------------
1891. | | | | | | |
Burlington Co. ... . | 538,824 | 1,448,229 | 73,075,310 | 106,415,962 | 269,491,272 | 69,594,747 | 66.24
St. Paul Co. ... . . | 64,496 | 228,671 | 10,267,118 | 36,397,629 | 46,664,747 | 7,403,263 | 70.78
Fremont Co... ... . | 141,056 | 654,400 | 21,863,680 | 101,644,999 | 123,508,679 | 24,898,729 | 49.87
Union Pacific Co... . | 152,028 | 1,908,045 | 28,908,124 | 362,966,694 | 391,874,818 | 66,072,597 | 68.94
Omaha Co... ... . . | 61,448 | 409,270 | 4,579,104 | 30,499,041 | 35,078,145 | 10,295,137 | 120.26
St. Joseph Co. ... . | 25,078 | 178,169 | 1,497,658 | 10,640,979 | 12,138,637 | 2,308,918 | 96.44
Kansas City Co... . . | 8,743 | 78,694 | 403,751 | 3,634,082 | 4,037,833 | 912,210 | 99.54
| | | | | | |
1892. | | | | | | |
Burlington Co. ... . | 574,653 | 1,996,437 | 91,139,965 | 316,552,193 | 407,692,158 | 70,038,243 | 64.23
St. Paul Co. ... . . | 65,762 | 264,403 | 11,028,287 | 44,321,384 | 55,349,671 | 8,833,405 | 65.96
Fremont Co... ... . | 158,350 | 846,312 | 24,069,200 | 128,425,903 | 152,495,103 | 21,874,987 | 70.71
Union Pacific Co... . | 192,865 | 1,882,112 | 42,970,322 | 419,300,773 | 462,271,095 | 56,926,269 | 56.44
Omaha Co... ... . . | 63,999 | 628,351 | 4,659,127 | 45,745,647 | 50,404,774 | 10,058,442 | 93.12
St. Joseph Co. ... . | 39,657 | 303,550 | 2,005,851 | 15,355,015 | 17,360,866 | 2,472,538 | 74.23
Kansas City Co... . . | 10,823 | 194,089 | 481,515 | 8,635,016 | 9,116,531 | 864,030 | 75.19
| | | | | | |
1893. | | | | | | |
Burlington Co. ... . | 583,294 | 2,221,005 | 93,703,675 | 357,131,753 | 450,925,428 | 83,091,418 | 65.51
St. Paul Co. ... . . | 78,753 | 279,218 | 12,848,551 | 45,554,417 | 58,402,968 | 9,074,093 | 64.58
Fremont Co... ... . | 187,804 | 800,158 | 26,855,972 | 114,511,328 | 141,367,300 | 23,209,212 | 53.66
Union Pacific Co... . | 220,061 | 2,068,568 | 45,948,736 | 431,949,561 | 477,898,297 | 63,422,117 | 58.51
Omaha Co... ... . . | 68,237 | 683,868 | 4,257,988 | 42,706,297 | 46,964,285 | 11,028,131 | 94.14
St. Joseph Co. ... . | 50,452 | 337,647 | 2,774,860 | 18,576,845 | 21,351,705 | 2,834,169 | 62.05
Kansas City Co... . . | 15,484 | 205,725 | 658,534 | 8,750,126 | 9,408,660 | 875,415 | 76.50
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From July 1, 1890, to June 30, 1891, as shown by Exhibit 20, the percentage of expenses to earnings on all business on the Burlington road was 66.24; on the St. Paul road, 70.78; on the Fremont road, 49.87; on the Union Pacific road, 68.94; on the Omaha road, 120.26; on the St. Joseph road, 96.44; and on the Kansas City road, 99.54;
From July 1, 1891, to June 30, 1892, as shown by the same Exhibit, the percentage of expenses to earnings on all business on the Burlington road was 64.23; on the St. Paul
From July 1, 1892, to June 30, 1893, as shown by the same Exhibit, the percentage of expenses to earnings on all business on the Burlington road was 65.51; on the St. Paul road, 64.58; on the Fremont road, 53.66; on the Union Pacific road, 58.51; on the Omaha road, 94.14; on the St. Joseph road, 62.05; and on the Kansas City road, 76.50.
In view of the reduction of 29.50 in rates prescribed by the statute and of the extra cost of doing local business, as compared with other business, what do these facts show?
Take the case of the Burlington road from July 1, 1890, to June 30, 1891. Looking at the entire business done on it during that period within the limits of the State, we find that the percentage of operating expenses to earnings on all business — which, as stated, does not include the extra cost of local business — was 66.24. Add to this the extra cost of local business, estimated at at least ten per cent, and the result is that, under the rates charged during the period stated, the cost to the Burlington Company of earning $100 would have been $76.24. Now, if the reduction of 29½ per cent made by the act of 1893 had been in force prior to July 1, 1891, the company would have received $70.50 as against $100 for the same service, showing that in that year the operating expenses would have exceeded the earnings by $5.74 in every $100 of the amount actually received by it.
By like calculations, it will appear that each of the railroad companies would have conducted its local business at a loss during the periods stated, except that in the year ending June 30, 1891, and in the year ending June 30, 1893, the earnings of the Fremont Company, and in the years ending the 30th days of June, 1892 and 1893, respectively, the earnings of the Union Pacific Company, would have slightly exceeded their operating expenses.
Under the rates prescribed by the act of 1893 the cost to the respective companies of local business in Nebraska would have exceeded the earnings for the years ending June 30,
In order to show these results at a glance, the table on page 536 is inserted upon the basis of one hundred as representing the amounts actually charged and received by the respective railroad companies for the years given.
There are other views of the case suggested by the above exhibits and table which show the same results.
In the year ending June 30, 1891, under the rates then in force, the Burlington Company received $1,066,871 for tons carried locally. If the business had been done under the rates prescribed by the act of 1893, it would have received 29½ per cent less, that is, only $752,145 or $314,726 less than it did receive. The percentage of expenses to earnings, including the extra cost of local business, was 76.24; that is, it cost $813,382 to earn $1,066,871. So that the difference between $813,382 and $752,145 shows that, if the rates prescribed by the statute of 1893 had been in force during the year ending June 30, 1891, the amount received would have been less than the operating expenses of the Burlington Company by $61,237.
During the year ending June 30, 1892, the same company received for tons carried locally $1,237,884. If the act of 1893 had been in force, it would have received, because of the reduced rates prescribed by that act, only $872,709 — less by $365,175 than it did receive. The percentage of expenses to earnings, including the extra cost of local business, was 74.23; that is, the $872,709 would have been earned at a cost of $918,881. So that under the rates prescribed by the act
============================================================================================================================== | Cost by percentage | Extra cost of local | Total cost of local | Earnings as reduced | | NAME. | of all business. | business. | business. | by act of 1893. | Loss. | Gain. ------------------------|--------------------|---------------------|---------------------|---------------------|-------|------ 1891. | | | | | | Burlington Company . . | 66.24 | 10 | 76.24 | 70.50 | 5.74 | St. Paul Company ... | 70.78 | 10 | 80.78 | 70.50 | 10.28 | Fremont Company ... . | 49.87 | 10 | 59.87 | 70.50 | ... | 10.63 Union Pacific Company . | 68.94 | 10 | 78.94 | 70.50 | 8.44 | Omaha Company ... . . | 120.26 | 10 | 130.26 | 70.50 | 59.76 | St. Joseph Company . . | 96.44 | 10 | 106.44 | 70.50 | 35.94 | Kansas City Company . . | 99.54 | 10 | 109.54 | 70.50 | 39.04 | | | | | | | 1892. | | | | | | Burlington Company . . | 64.23 | 10 | 74.23 | 70.50 | 3.73 | St. Paul Company ... | 65.96 | 10 | 75.96 | 70.50 | 5.46 | Fremont Company ... . | 70.71 | 10 | 80.71 | 70.50 | 10.21 | Union Pacific Company . | 56.44 | 10 | 66.44 | 70.50 | ... | 4.06 Omaha Company ... . . | 93.12 | 10 | 103.12 | 70.50 | 32.62 | St. Joseph Company . . | 74.23 | 10 | 84.23 | 70.50 | 13.73 | Kansas City Company . . | 75.19 | 10 | 85.19 | 70.50 | 14.69 | | | | | | | 1893. | | | | | | Burlington Company . . | 65.51 | 10 | 75.51 | 70.50 | 5.01 | St. Paul Company ... | 64.58 | 10 | 74.58 | 70.50 | 4.08 | Fremont Company ... . | 53.66 | 10 | 63.66 | 70.50 | ... | 6.84 Union Pacific Company . | 58.51 | 10 | 68.51 | 70.50 | ... | 1.99 Omaha Company ... . . | 94.14 | 10 | 104.14 | 70.50 | 33.64 | St. Joseph Company . . | 62.05 | 10 | 72.05 | 70.50 | 1.55 | Kansas City Company . . | 76.50 | 10 | 86.50 | 70.50 | 16.00 | ==============================================================================================================================
of 1893 the loss during the period named would have been $46,172.
During the year ending June 30, 1893, that company received $1,242,416 for tons carried locally; whereas, under the 29½ per cent reduction prescribed by the statute of that year, it would have received only $875,905, that is, less by $366,512 than it did receive. The percentage of its expenses to earnings in that year, including the extra cost of local business, was 75.51; that is, under the statutory rates $875,905 would have been earned at a cost of $938,147; which would have been a loss of $62,243.
These results will be seen in the table on page 538, based upon the above exhibits, and assuming that 10 per cent was the very lowest amount of the extra cost of business beginning and ending in the State.
Counsel for the appellants contend that the railroad companies in Nebraska derived a profit from their local tonnage of nearly 100 per cent over and above operating expenses. This contention is based upon the evidence given by William Randall, freight and ticket agent as well as auditor of the Burlington road in Nebraska, on his first examination as a witness. He then stated that the earnings of the company for the year 1892 — meaning for the year beginning January 1, 1892 — upon freight starting and ending within the State were $1,853,036.59, and that the operating expenses, including taxes, on that business were $972,183.70. These figures, counsel say, show that “there was a clear profit over operating expenses, including taxes, of nearly one hundred per cent on the local business of the Burlington Company in 1892.” But counsel overlook the fact that, upon his second examination, Mr. Randall stated that his first figures were not correct, and that the operating expenses on local business in 1892 were
========================================================================================================================================================== | | | What would | Amount to be | Amount to be | | | | Total amount | Total amount | have been received | deducted to pay | taken out of | | | | received for | of reduction by | under | expenses (reckoned | earnings to pay | Total expense | Gain. | Loss. NAME OF ROAD | tons carried | act of 1893, 29½ | rates fixed by | by per | 10 per cent extra | of local business. | | | locally. | per cent. | act of 1893. | cent of cost of | cost of local | | | | | | | all business). | business. | | | ------------------|--------------|------------------|--------------------|--------------------|-------------------|--------------------|---------|-------- 1891. | | | | | | | | Burlington Co. . | $1,066,871 | $314,726 | $752,145 | $706,695 | $106,687 | $813,382 | ... | $61,237 St. Paul Co. . . | 110,933 | 32,725 | 78,208 | 78,518 | 11,093 | 89,611 | ... | 11,403 Fremont Co... . | 348,408 | 102,780 | 245,628 | 173,751 | 34,840 | 208,591 | $37,037 | ... Union Pacific Co. | 278,211 | 82,072 | 196,139 | 191,798 | 27,821 | 219,619 | ... | 23,480 Omaha Co... . . | 75,581 | 22,296 | 53,285 | 90,893 | 7,558 | 98,451 | ... | 45,166 St. Joseph Co. . | 21,817 | 6,436 | 15,381 | 21,040 | 2,181 | 23,221 | ... | 7,840 Kansas City Co. . | 6,732 | 1,985 | 4,747 | 6,701 | 673 | 7,374 | ... | 2,627 | | | | | | | | 1892. | | | | | | | | Burlington Co. . | 1,237,884 | 365,175 | 872,709 | 795,093 | 123,788 | 918,881 | ... | 46,172 St. Paul Co. . . | 123,033 | 36,294 | 86,739 | 81,152 | 12,303 | 93,455 | ... | 6,716 Fremont Co... . | 336,714 | 99,330 | 237,384 | 238,090 | 33,671 | 271,761 | ... | 34,377 Union Pacific Co. | 398,262 | 117,487 | 280,775 | 224,779 | 39,826 | 264,605 | 16,170 | ... Omaha Co... . . | 88,335 | 26,058 | 62,277 | 82,257 | 8,833 | 91,090 | ... | 28,813 St. Joseph Co. . | 31,004 | 9,146 | 21,858 | 23,014 | 3,100 | 26,114 | ... | 4,256 Kansas City Co. . | 6,630 | 1,955 | 4,674 | 4,985 | 663 | 5,648 | ... | 974 | | | | | | | | 1893. | | | | | | | | Burlington Co. . | 1,242,416 | 366,512 | 875,904 | 813,906 | 124,241 | 938,147 | ... | 62,243 St. Paul Co. . . | 142,542 | 42,049 | 100,493 | 92,053 | 14,254 | 106,307 | ... | 5,814 Fremont Co... . | 424,437 | 125,208 | 299,229 | 227,750 | 42,443 | 270,193 | 29,036 | ... Union Pacific Co. | 413,714 | 122,045 | 291,669 | 242,064 | 41,371 | 283,435 | 8,234 | ... Omaha Co... . . | 80,519 | 23,753 | 56,766 | 75,800 | 8,051 | 83,851 | ... | 27,085 St. Joseph Co. . | 33,802 | 9,971 | 23,831 | 20,974 | 3,380 | 24,354 | ... | 523 Kansas City Co. . | 9,445 | 2,786 | 6,659 | 7,225 | 944 | 8,169 | ... | 1,510 ==========================================================================================================================================================
It is said by the appellants that the local rates established by the Nebraska statute are much higher than in the State of Iowa, and that fact shows that the Nebraska rates are reasonable. This contention was thus met by the Circuit Court: “It is, however, urged by the defendants that, in the general tariffs of these companies, there is an inequality; that the rates in Nebraska are higher than those in adjoining States, and that the reduction by House Roll 33 simply establishes an equality between Nebraska and the other States through
It is further said, in behalf of the appellants, that the reasonableness of the rates established by the Nebraska statute is not to be determined by the inquiry whether such rates would leave a reasonable net profit from the local business affected thereby, but that the court should take into consideration, among other things, the whole business of the company, that is, all its business, passenger and freight, interstate and domestic. If it be found upon investigation that the profits derived by a railroad company from its interstate business alone are sufficient to cover operating expenses on its entire line, and also to meet interest, and justify a liberal dividend upon its stock, may the legislature prescribe rates for domestic
Touching the suggestion that the reduction on rates made by the state law was reasonable, if regard be had to all the business, through and local, done in the State by the railroad companies, the Circuit Court said:
“But again, as Mr. Dilworth testified, the average reduction on local rates caused by House Roll 33 is 29½ per cent. The tariff which was in force at the time of the passage of this act had been, for some three or more years, fixed by the voluntary action of the railroad companies, and the reduction of 29½ per cent was from their rates. It must be remembered that these roads are competing roads; that competition tends to a reduction of rates — sometimes, as the history of the country has shown, below that which affords any remuneration to those who own the property. Can it be possible that any business so carried on can suffer a reduction of 29½ per cent in its receipts without ruin? What would any business man, engaged in any business of a private character, think of a compulsory reduction of his receipts to the amount of 29½ per cent? The effect of this testimony is not destroyed by the table offered of the percentage of reduction on the total amount of business done by these companies in the State as follows:
“B. & M. R. ............................ 4.2 per cent. “C., St. P., M. & O. ................... 4.5 per cent. “F., E. &. M. B. ....................... 4.1 per cent. “Union Pacific ......................... 2.0 per cent. “O. & R. V. ............................ 1.9 per cent. “St. J. & G. I. ........................ 2.7 per cent. “K. C. & O. ............................ 1.5 per cent.
“For such a table only indicates, as is further shown by Defendants’ Exhibit 4, how small a proportion of the total amount of business done in the State comes from purely local freight. Nor is it weakened by any comparison between the amount of reduction and the total receipts from all business.
It appears, from what has been said, that if the rates prescribed by the act of 1893 had been in force during the years ending June 30, 1891, 1892 and 1893, the Fremont Company, in the years ending June 30, 1891, and June 30, 1893, and the Union Pacific Company, in the years ending June 30, 1892, and June 30, 1893, would each have received more than enough to pay operating expenses. Do those facts affect the general conclusion as to the probable effect of the act of 1893? In the discussion of this question, the plaintiffs contended that a railroad company is entitled to exact such charges for transportation as will enable it, at all times, not only to pay operating expenses, but also to meet the interest regularly accruing upon all its outstanding obligations, and justify a dividend upon all its stock; and that to prohibit it from maintaining rates or charges for transportation adequate to all those ends will deprive it of its property without due process of law, and deny to it the equal protection of the laws. This contention was the subject of elaborate discussion; and, as it bears upon each case in its important aspects, it should not be passed without examination.
If a railroad corporation has bonded its property for an amount that exceeds its fair value, or if its capitalization is largely fictitious, it may not impose upon the public the burden of such increased rates as may be required for the purpose of realizing profits upon such excessive valuation or fictitious capitalization; and the apparent value of the property and franchises used by the corporation, as represented by its
A corporation maintaining a public highway, although it owns the property it employs for accomplishing public objects, must be held to have accepted its rights, privileges and franchises subject to the condition that the government creating it, or the government within whose limits it conducts its business, may by legislation protect the people against unreasonable
We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And in order to ascertain that value, the
In concluding this opinion, it may not be inappropriate to say that the conclusions reached by us as to the effect of the Nebraska statute find some support in the report of the Board of Secretaries of the Nebraska Board of Transportation made in September, 1891, to the Board itself, and signed by Mr. Dilworth
To this report of the Secretaries is appended the “Findings of the Board,” from which we make this extract: “After a careful and quite thorough investigation of the question of freight rates in Nebraska, which has occupied much time, and has taken a wide range, the state Board of Transportation has arrived at the conclusion that the rates now in force in this State cannot be generally reduced without doing violence to the business interests of the State, and at the same time injuring the shipping and producing classes. We have come to this conclusion, not by taking the cost of construction and equipments, nor the amount of stock and bonds issued per mile, but by making our computations upon the basis of what it would cost to duplicate the property at the present time. It has been our endeavor to deal fairly and justly with the question, and in arriving at a conclusion we have been governed only by the evidence, statements and facts produced for our consideration. A candid examination and comparison of the figures presented to us in the unanimous report of the Board of Secretaries, in the opinion of this Board, fully justifies the conclusion reached: That a general reduction of rates, as now in force over the State, is not practical at this time.”
So that we have the judgment of the state Board of Transportation, as constituted in 1891, that a general reduction of rates could not then have been made without injury to the business of the State, to say nothing of the interests of those whose means were invested in railroad property. We are unable to find from the record before us that the situation in Nebraska had so changed in 1893 as to justify that being done in that year which it was not safe or just to do in 1891.
But it may be added that the conditions of business, so far as railroad corporations are concerned, have probably changed
Perceiving no error on the record in the light of the facts presented to the Circuit Court,
The decree in each case must be affirmed.
The CHIEF JUSTICE took no part in the consideration or decision of these cases.
MR. JUSTICE McKENNA was not a member of the court when they were argued and submitted, and took no part in