The Topeka state journal., 1909-03-08
Two Cent Fare and Maximum
Rate Laws Invalid.
Federal Judge Smith Mcpherson
Hands DOwn His Decision.
CRATES ARE TOO Low
Not RemuneratiYe and There
fore the Statute Is Void.
Ought to Earn Six Per Cent
Getting Only Three"

Kansas City Mo. March S.-A nota-
bic decision in favor of the railroads
was handed down today by Judge Nc
Pherson. of the United States district
court, in the two cent fare and maxi
mum freight rate cases. involving IL
Missouri lines. The railroads contend
ed that the rates fixed by the statutes
of the state were not remunerative but
confscatory, and that the enforcement
of the statutes be enjoined. The state
brought proceedings to have them en-
forced
THE question" said Judge McPher-
son in his decision, lis whether the
traffic wholly within the state of Mis-
souri, generally referred to in the evl-
dence local traffic. can be carried
under the freight rate statute of 1907
and the passenger fare statute or lSUf
at such profit will give reason
able return after paying expenses upon
the investment, or whether such traf-
fic is carried at a loss or less than such
reasonable profit. The court has
reached the conclusion that upon this
question the statutory rates fixed by
either and both statutes are not re-
muneratiVe.
His Reasons.
In giving the reasons for such con-
clusions the decision says: The ques-
toned and undoubted rule is that there
is a presumption both of fact and OF
law in favor of the validity of every
legislative enactment The railway
companies have the burden of remov
ing this presumption. and showing that
the statute clearly, or as some courts
say, palpably, and others say. beyond
a reasonable doubt, that the statute IS
invalid. In these cases the court has
recognized this rule. The authorities
upon this question form a long and un-
broken line, with the single exception
CT the majority opinion in the Penn
sylvania case decided a year ago. C6S
AtI. Rep. 676). And that one authority
Is not persuasive.
''All testimony and argument bearing
upon the question as to what consider
alton the legislature of Missouri gave
TO these enactlnents. is utterly lmma-
teriaL. Much vas said in argument as
TO the message of Governor Hughes, of
New York, two years ago in declining
to approve the two cent fare statute of
thas state. Governor Hughes had the
moral courage e. veto Il measure of
popular favor because as he believed the
question had not been fully considered.
But the relations of a governor to pro-
posed legislation, and those of a court
TO legislation consummated, are entire
y different.
Railroad Earnings.
Most of laymen and many lawyers
believe that the question is whether
the railway company as a system is
earning sufficient revenue upon the
value of the property of the system.
They believe that if the Burlington,
Santa Fe, Wabash, or any other raii-
road system is earning su3h money as
II i'll pay all charges and expenses IN
GLIDING taxes and InCCrGo- with rea-
sonabl dividends, to the stockholders,
that state rates for state business must
stand. OF course no one believes this
who has given the slightest attention
tc the question. That precise question
was before and was decided by JUS
tice Brewer. and affirmed by the su-
preme court in the Nebraska case of
Smyth VS.. Ames. The only question is
as to Missouri rates, less expenses pro-
perly charged against the same. And
if this balance does not leave sufficient
to pay a reasonable return, the law is
invalid. And if the railroad system
of any ompany is earning more than
a reasonable return by reason of inter
many times more than local rates, and
is such interstate rates are too high.
congress either acting alone or through
a commission must make the correc-
| on.
Six Per Cent About Right
THE supreme court during the pres
ent year in the case of City of New
York VS.. Consolidated Gas company of !
New York decided that six per cent |
was fair and right to be given to the |
owners upon the true valuation NV |
opinion is that while gas plant is in |
some respects different from a rail- |
road, that railroad property. prop
erly built, and properly managed, |
ShOuld
a return of six per cent per annum. |
And considering all the evidence, the |
evidence fairly shows that all of these
roads were properly and economically !
built and are being properly and |
economically managed, and that after |
paying the expenses for maintenance |
and operation that there is less than
six per cent of returns, and not more
than three per cent, upon any of them |
and as to some of them a deficit TAX |
ing the property as above stated within |
the state of Missouri at its fair vaIua-
ton And this is without reference
TO bonds because in no case do the
bonds bear six per cent interest. But |
taking the bonds into consideration, |
there Is still not to exceed three per |
,ent returns, and in many cases a de- |
ficit considering all debts and credits. |
11pou the true valuation for the state
business There is no evidence that |
any of the existing bonds were i'm |
properly issued either as to amounts or |
rates Of interest. In fixing the value |
the court has considered the evidence
of witnesses as to the stocks and bonds |
outstanding and the state board for |
taxing purposes has valued these prop
critics OF course those findings are not |
binding nor conclusive; but they are |
persuasive. But independently of stocks
and bonds and independently of what |
+ha state board has valued these prop
critics for taxing purposes, the evidence
sbovvs the valuations to be as recited in /
the findings of fact herewith filed. and |
TO which reference will be made in the
DEGREES.
trains both passenger and freight do
both a local and interstate business
Even the fast trains stopping at but
few statfonS in the state carry state