Source: https://www.law.cornell.edu/supremecourt/text/154/362
Timestamp: 2019-04-19 05:12:59+00:00

Document:
This was a suit by the Farmers' Loan & Trust Company against John H. Reagan, W. P. McLean, L. L. Foster (railroad commissioners of the state of Texas), C. A. Culberson (attorney general of the state), the International & Great Northern Railroad Company, and Thomas N. Campbell (receiver of that company), brought to restrain said railroad commissioners from enforcing certain rates and regulations prescribed by them for said company, and to restrain the attorney general from suing for penalties for failure to conform to such rates and obey such regulations. The railroad company filed an answer and a cross bill similar to complainant's bill, and praying substantially the same relief. The railroad commissioners and the attorney general filed answers, but afterwards withdrew their answers, and filed demurrers. Their demurrers were overruled, and a decree for defendants was rendered, making a temporary injunction previously granted (51 Fed. 529) perpetual. The railroad commissioners and the attorney general appealed.
'Sec. 3. The power and authority is hereby vested in the railroad commission of Texas and it is hereby made its duty, to adopt all necessary rates, charges, and regulations to govern and regulate railroad freight and passenger tariffs, the power to correct abuses and prevent unjust discrimination and extortion in the rates of freight and passenger tariffs on the different railroads in this state, and to enforce the same by having the penalties inflicted as by this act prescribed through proper courts having jurisdiction.
'(a) The said commission shall have power, and it shall be its duty, to fairly and justly classify and subdivide all freight and property of whatsoever character that may be transported over the railroads of this state into such general and special classes or subdivisions as may be found necessary and expedient.
'(b) The commission shall have power, and it shall be its duty, to fix to each class or subdivision of freight a reasonable rate for each railroad subject to this act for the transportation of each of said classes and subdivisions.
'(c) The classifications herein provided for shall apply to and be the same for all railroads subject to the provisions of this act.
'(d) The said commission may fix different rates for different railroads and for different lines under the same management, or for different parts of the same lines if found necessary to do justice, and may make rates for express companies different from the rates fixed for railroads.
'(e) The said commission shall have power, and it shall be its duty, to fix and establish for all or any connecting lines of railroad in this state reasonable joint rates of freight charges for the various classes of freight and cars that may pass over two or more lines of such railroads.
'(f) If any two or more connecting railroads shall fail to agree upon a fair and just division of the charges arising from the transportation of freights, passengers or cars over their lines, the commission shall fix the pro rata part of such charges to be received by each of said connecting lines.
'(g) Until the commission shall make the classifications and schedules of rates as herein provided for, and afterwards if they deem it advisable, they may make partial or special classifications for all or any of the railroads subject hereto, and fix the rates to be charged by such roads therefor; and such classifications and rates shall be put into effect in the manner provided for general classifications and schedules of rates.
'(h) The commission shall have power, and it shall be its duty from time to time, to alter, change, amend, or abolish any classification or rate established by it when deemed necessary; and such amended, altered, or new classifications or rates shall be put into effect in the same manner as the originals.
'(i) The commission may adopt and enforce such rules, regulations, and modes of procedure as it may deem proper to hear and determine complaints that may be made against the classifications or the rates, the rules, regulations, and determinations of the commission.
'(j) The commission shall make reasonable and just rates of charges for each railroad subject hereto for the use or transportation of loaded or empty cars on its road; and may establish for each railroad or for all railroads alike reasonable rates for the storing and handling of freight and for the use of cars not unloaded after forty-eight hours' notice to the consignee, not to include Sundays.
'Sec. 5. In all actions between private parties and railway companies brought under this law, the rates, charges, orders, rules, regulations, and classifications prescribed by said commission before the institution of such action shall be held conclusive, and deemed and accepted to be reasonable, fair, and just, and in such respects shall not be controverted therein until finally found otherwise in a direct action brought for that purpose in the manner prescribed by sections 6 and 7 hereof.
'Sec. 6. If any railroad company or other party at interest be dissatisfied with the decision of any rate, classification, rule, charge, order, act, or regulation adopted by the commission, such dissatisfied company or party may file a petition setting forth the particular cause or causes of objection to such decision, act, rate, rule, charge, classification, or order, or to either or all of them, in a court of competent jurisdiction in Travis county, Texas, against said commission as defendant. Said action shall have precedence over all other causes on the docket of a different nature, and shall be tried and determined as other civil causes in said court. Either party to said action may appeal to the appellate court having jurisdiction of said cause, and said appeal shall be at once returnable to said appellate court, at either of its terms, and said action so appealed shall have precedence in said appellate court of all causes of a different character therein pending: provided, that if the court be in session at the time such right of action accrues, the suit may be filed during such term and stand ready for trial after ten days' notice.
Sections 8-13 contain special provisions which are not material to the consideration of any question presented in this case.
Section 15 defines 'unjust discrimination,' and imposes a penalty of not less than $500, nor more than $5,000, upon any railroad company violating any provision of the section.
Section 16 is leveled against officers and agents of railroads, and imposes a penalty of not less than $100, nor more than $1,000, for certain offenses denounced therein.
Section 17 declares that any railroad company violating the provisions of the act shall be liable to the persons injured thereby for the damages sustained in consequence of such violation, and in case it is guilty of extortion or discrimination, as defined in the act, shall pay, in addition to such damages, to the person injured, a penalty of not less than $125, nor more than $500.
In sections 18 and 19 are further provisions as to penalties. The remaining sections20 to 24, inclusivecontain matter of detail, which is unimportant in this case.
Three of the plaintiffs in error, Reagan, McLean, and Foster, were duly appointed and qualified as members of said railroad commission, and organized it on the 10th day of June, 1891. The other plaintiff in error, Culberson, is the attorney general of the state, who, by section 19 of the act, was charged with the duty of instituting suits in the name of the state for the recovery of all the penalties prescribed by the act, excepting those recoverable by individuals under the authority of section 17.
'First. That the injunctions heretofore issued in this cause be, and the same are hereby, made perpetual, and accordingly.
'Second. That defendant, the International & Great Northern Railroad Company be, and it is hereby, perpetually enjoined, restrained, and prohibited from putting or continuing in effect the rates, tariffs, circulars, or orders of the railroad commission of Texas, or either or any of them, as described in the bill of complaint herein, and in Exhibit C, thereto and therewith filed, and from charging, or continuing to charge, the rates specified in said tariffs, circulars, or orders, or either or any of them.
'Third. It is further ordered, adjudged, and decreed that the defendants the railroad commission of Texas and the defendants John H. Reagan, William P. McLean, and L. L. Foster, acting as the railroad commission of Texas, and their successors in office, and the defendant Charles A. Culberson, acting as attorney general of the state of Texas, and his successors in office, be, and they are hereby, perpetually enjoined, restrained, and prohibited from instituting or authorizing or directing any suit or suits, action or actions, against the defendant railroad company for the recovery of any penalties under and by virtue of the provisions of the act of the legislature of the state of Texas approved April 3, 1891, and fully described in the bill of complaint, or under or by virtue of any of the said tariffs, orders, or circulars of the said railroad commission of Texas, or any or either of them, or under or by virtue of the said act and the said tariffs, orders, or circulars of said railroad commission, or any or either of them combined; and said defendants Reagan, McLean, and Foster, and the railroad commission of Texas, are further perpetually restrained from certifying any copy or copies of any of said orders, tariffs, or circulars, or from delivering, or causing or permitting to be delivered, certified copies of any of said orders, tariffs, or circulars to the said Culberson, or any other party, and from furnishing the said Culberson, or any other party, and information, of any character, for the purpose of inducing, enabling, or aiding him, or any other party, to institute or prosecute any suit or suits against the said defendant railroad company for the recovery of any penalty or penalties under the said act.
'Fourth. It is further ordered, adjudged, and decreed that the said railroad commission of Texas and the said Reagan, McLean, and Foster be perpetually enjoined, restrained, and prohibited from making, issuing, or delivering to the said railroad company, or causing to be made, issued, or delivered to it, any further tariff or tariffs, circular or circulars, order or orders.
'Fifth. It is further ordered, adjudged, and decreed that all other individuals, persons, or corporations be, and they are hereby, perpetually enjoined, restrained, and prohibited from instituting or prosecuting any suit or suits against the said railroad company for the recovery of any damages, overcharges, penalty, or penalties, under or by virtue of the said act or any of its provisions, or under and by virtue of the said tariffs, orders, or circulars of the said railroad commission of Texas, or any or either of them, or under and by virtue of the said act and the said tariffs, orders, and circulars, or any or either of them combined.
'Sixth. If is further ordered, adjudged, and decreed that all rates, tariffs, circulars, and orders heretofore made and issued by said commission, and fully described in Exhibit C to the bill of complaint herein, be, and they are hereby, declared to be unreasonable, unfair, and unjust as to complainant and cross complainant, and they are hereby canceled, and declared to be null, void, and of no effect.
Mr. Charles A. Culberson, Attorney General of the State of Texas, for appellants.
S. Pierce, Geo. R. Peck, and J. W. Terry, for appellees.
Henry C. Coke, and W. S. Simkins, for appellants.
The questions in this case are of great importance and have been most ably and satisfactorily discussed by counsel for the respective parties.
'It is well settled that no action can be maintained in any federal court by the citizens of one of the states against a state, without its consent, even though the sole object of such suit be to bring the state within the operation of the constitutional provision which provides that 'no state shall pass any law impairing the obligation of contracts.' This immunity of a state from sui absolute and unqualified, and the constitutional provision securing it is not to be so construed as to place the state within the reach of the process of the court. Accordingly, it is equally well settled that a suit against the officers of a state, to compel them to do the acts which constitute a performance by it of its contracts, is, in effect, a suit against the state itself.
'In the application of this latter principle, two classes of cases have appeared in the decisions of this court, and it is in determining to which class a particular case belongs that differing views have been presented.
'The first class is where the suit is brought against the officers of the state, as representing the state's action and liability, and thus making it, though not a party to the record, the real party against which the judgment will so operate as to compel it to specifically perform its contracts. In re Ayers, 123 U. S. 443, 8 Sup. Ct. 164; Louisiana v. Jumel, 107 U. S. 711, 2 Sup. Ct. 128; Antoni v. Greenhow, 107 U. S. 769, 2 Sup. Ct. 91; Cunningham v. Railroad Co., 109 U. S. 446, 3 Sup. Ct. 292, 609; Hagood v. Southern, 117 U. S. 52, 6 Sup. Ct. 608.
'The other class is where a suit is brought against defendants who, claiming to act as officers of the state, and under the color of an unconstitutional statute, commit acts of wrong and injury to the rights and property of the plaintiff acquired under a contract with the state. Such suit, whether brought to recover money or property in the hands of such defendants, unlawfully taken by them in behalf of the state, or for compensation in damages, or, in a proper case where the remedy at law is inadequate, for an injunction to prevent such wrong and injury, or for a mandamus, in a like case, to enforce upon the defendant the performance of a plain, legal duty, purely ministerial, is not, within the meaning of the eleventh amendment, an action against the state. Osborn v. Bank, 9 Wheat. 738; Davis v. Gray, 16 Wall. 203; Tomlinson v. Branch, 15 Wall. 460; Litchfield v. Webster Co., 101 U. S. 773; Allen v. Railroad Co., 114 U. S. 311, 5 Sup. Ct. 925, 962; Board v. McComb, 92 U. S. 531; Poindexter v. Greenhow, 114 U. S. 270, 5 Sup. Ct. 903, 962.' Appellants invoke the doctrines laid down in these two quotations, and insist that this action cannot be maintained because the real party against which alone in fact the relief is asked, and against which the judgment or decree effectively operates, is the state, and also because the statute under which the defendants acted, and proposed to act, is constitutional, and that the action of the state officers under a constitutional statute is not subject to challenge in the federal court. We are unable to yield our assent to this argument. So far from the state being the only real party in interest, and upon whom alone the judgment effectivly operates, it has, in a pecuniary sense, no interest at all. Going back of all matters of form, the only parties pecuniarily affected are the shippers and the carriers; and the only direct pecuniary interest which the state can have arises when it abandons its governmental character, and, as an individual, employs the railroad company to carry its property. There is a sense, doubtless, in which it may be said that the state is interested in the question, but only a governmental sense. It is interested in the well-being of its citizens, in the just and equal enforcement of all its laws; but such governmental interest is not the pecuniary interest which causes it to bear the burden of an adverse judgment. Not a dollar will be taken from the trasury of the state, no pecuniary obligation of it will be enforced, none of its property affected by any decree which may be rendered. It is not nearly so much affected by the decree in this case as it would be by an injunction against officers, staying the collection of taxes; and yet a frequent and unquestioned exercise of jurisdiction of courts, state and federal, is in restraining the collection of taxes, illegal in whole or in part.
'Another class of cases is where an individual is sued in tort for some act injurious to another in regard to person or property, to which his defense is that he has acted under the orders of the government.
Nor can it be said, in such a case, that relief is obtainable only in the courts of the state; for it may be laid down, as a general proposition, that, whenever a citizen of a state can go into the courts of the state to defend his property against the illegal acts of its officers, a citizen of another state may invoke the jurisdiction of the federal courts to maintain a like defense. A state cannot tie up a citizen of another state, having property rights within its territory invaded by unauthorized acts of its own officers, to suits for redress in its own courts. Given a case where a suit can be maintained in the courts of the state to protect property rights, a citizen of another state may invoke the jurisdiction of the federal courts. Cowles v. Mercer Co., 7 Wall. 118; Lincoln Co. v. Luning, 133 U. S. 529, 10 Sup. Ct. 363; Chicot Co. v. Sherwood, 148 U. S. 529, 13 Sup. Ct. 695.
We need not, however, rest on the general powers of a federal court in this respect; for, in the act before us, express authority is given for a suit against the commission to accomplish that which was the specific object of the present suit. Section 6 provides that any dissatisfied 'railroad company, or other party at interest, may file a petition' 'in a court of competent jurisdiction in Travis county, Texas, against said commission as defendant.' The language of this provision is significant. It does not name the court in which the suit may be brought. It is not a court of Travis county, but in Travis county. The language, differing from that which ordinarily would be used to describe a court of the state, was selected, apparently, in order to avoid the objection of an attempt to prevent the jurisdiction of the federal courts. The circuit court for the western district of Texas is 'a court of competent jurisdiction in Travis county.' Not only is Travis county within the territorial limits of its jurisdiction, but also Austin, in that county, is one of the places at which the court is held. 23 Stat. 35. It comes, therefore, within the very terms of the act. It cannot be doubted that a state, like any other government, can waive exemption from suit. Were this, in terms, a suit against the state, if by express statute the state had waived its exemption, and consented that suit might be brought against it, by name, in any court of competent jurisdiction in Travis county, it might well be argued that thereby it consented to a suit brought by a citizen of another state in the circuit court of the United States for the western district of Texas, sitting in Travis county, on the ground that the limitations of the eleventh amendment to the federal constitution simply create a personal privilege, which can at any time be waived by the state. However, it is unnecessary to go so far as that, for this cannot, for the reasons heretofore indicated, in any fair sense, be considered a suit against the state.
Still another matter is worthy of note in this direction. In the famous Dartmouth College Case, 4 Wheat. 518, it was held that the charter of a corporation is a contract protected by that clause of the national constitution, which prohibits a state from passing any law impairing the obligation of contracts. The International & Great Northern Railroad Company is a corporation created by the state of Texas. The charter which created it is a contract whose obligations neither party can repudiate without the consent of the other. All that is within the scope of this contract need not be determined. Obviously, one obligation assumed by the corporation was to construct and operate a railroad between the termini named; and, on the other hand, one obligation assumed by the state was that it would not prevent the company from so constructing and operating the road. If the charter had, in terms, granted to the corporation power to charge and collect a definite sum per mile for the transportation of persons or of property, it would not be doubted that that express stipulation formed a part of the obligation of the state, which it could not repudiate. Whether, in the absence of an express stipulation of that character, there is not implied, in the grant of the right to construct and operate, the grant of a right to charge and collect such tolls as will enable the company to successfully operate the road, and return some profit to those who have invested their money in the construction, is a question not as yet determined. It is at least a question which arises as to the extent to which that contract goes, and one in which the corporation has a right to invoke the judgment of the courts; and if the corporation (a citizen of the state) has the right to maintain a suit for the determination of that question, clearly a citizen of another state, who has, under authority of the laws of the state of Texas, become pecuniarily interested inequitably, indeed, the beneficial owner of the property ofthe corporation, may invoke the judgment of the federal courts as to whether the contract rights created by the charter, and of which it is thus the beneficial owner, are violated by subsequent acts of the state in limitation of the right to collect tolls. Our conclusion from these considerations is that the objection to the jurisdiction of the circuit court is not tenable; and this whether we rest upon the provisions of the statute, or upon the general jurisdiction of the court existing by virtue of the statutes of congress, under the sanction of the constitution of the United States.
Passing from the question of jurisdiction to the act itself, there can be no doubt of the general power of a state to regulate the fares and freights which may be charged and received by railroad or other carriers, and that this regulation can be carried on by means of a commission. Such a commission is merely an administrative board created by the state for carrying into effect the will of the state, as expressed by its legislation. Railroad Commission Cases, 116 U. S. 307, 6 Sup. Ct. 334. No valid objection, therefore, can be made on account of the general features of this act,those by which the state has created the railroad commission, and intrusted it with the duty of prescribing rates of fares and freights, as well as other regulations for the management of the railroads of the state.
Specific objections are made to the act on the ground that, by section 5, the rates and regulations made by the commission are declared conclusive in all actions between private individuals and the companies, and that, by section 14, excessive penalties are imposed upon railroad corporations for any violation of the provisions of the act; and thus, as claimed, there is not only a limitation, but a practical denial, to railroad companies, of the right of a judicial inquiry into the reasonableness of the rates prescribed by the commission. The argument is, in substance, that railroad companies are bound to submit to the rates prescribed until, in a direct proceeding, there has been a final adjudication that the rates are unreasonable, which final adjudication, in the nature of things, cannot be reached for a length of time; that meanwhile a failure to obey those regulations exposes the company, for each separate fare or freight exacted in excess of the prescribed rates, to a penalty so enormous as in a few days to roll up a sum far above the entire value of the property; that even if, in a direct proceeding, the rates should be adjudged unreasonable, there is nothing to prevent the commission from re-establishing rates but slightly changed, and still unreasonable, to set aside which requires a new suit, with its length of delay; and thus, as is claimed, the railroad companies are tied hand and foot, and bound to submit to whatever illegal, unreasonable, and oppressive regulations may be prescribed by the commission.
It is enough to say, in respect to these matters,at least, so far as this case is concerned,that it is not to be supposed that the legislature of any state, or a commission appointed under the authority of any state, will ever engage in a deliberate attempt to cripple or destroy institutions of such great value to the community as the railroads, but will always act with the sincere purpose of doing justice to the owners of railroad property, as well as to other individuals, and also that no legislation of a state, as to the mode of proceeding in its own courts, can abridge or modify the powers existing in the federal courts, sitting as courts of equity; so that if, in any case, there should be any mistaken action on the part of a state, or its commission, injurious to the rights of a railroad corporation, any citizen of another state, interested directly therein, can find in the federal court all the relief which a court of equity is justified in giving. We do not deem it necessary to pass upon these specific objections, because the fourteenth section, or any other section prescribing penalties, may be dropped from the statute without affecting the validity of the remaining portions, and, if the rates established by the commission are not conclusive, they are at least prima facie evidence of what is reasonable and just. For the purpose of this case, it may be conceded that both the clauses are unconstitutional, and still the great body of the act remains unchallenged,that which establishes the commission, and empowers it to make reasonable rates and regulations for the control of railroads. It is familiar law that one section or part of an act may be invalid without affecting the validity of the remaining portion of the statute. Any independent provision may be thus dropped out, if that which is left is fully operative as a law, unless it is evident, from a consideration of all the sections, that the legislature would not have enacted that which is within, independently of that beyond, its power. Applying this rule, and the invalidity of these two provisions may be conceded without impairing the force of the rest of the act. The creation of a commission, with power to establish rules for the operation of railroads, and to regulate rates, was the prime object of the legislation. This is fully accomplished, whether any penalties are imposed for a violation of the rules prescribed, or whether the rates shall be conclusive, or simply prima facie, evidence of what is just and reasonable. The matters of penalty, and the effect, as evidence, of the rates, are wholly independent of the rest of the statute. Neither can it be supposed that the legislature would not have established the commission, and given it power over railroads, without these independent matters. In other words, it is not to be presumed that the legislature was legislating for the mere sake of imposing penalties, but the penalties, and the provision as to evidence, were simply in aid of the main purpose of the statute. They may fail, and still the great body of the statute have operative force, and the force contemplated by the legislature in its enactment. Take a similar body of legislation,a tax law. There may be incorporated into such a law a provision giving conclusive effect to tax deeds, and also a provision as to the penalties incurred by nonpayment of taxes. These two provisions may, for one reason or another, be obnoxious to constitutional objections. If so, they may be dropped out, and the balance of the statute exist. It would not for a moment be presumed that the whole tax system of the state depended for its validity upon the penalties for nonpayment of taxes, or the effect to be given to the tax deed. We therefore, for the purposes of this case, assume that these two provisions of the statute are open to the constitutional objections made against them. We do not mean by this to imply that they are so in fact, but simply that it is unnecessary to consider and determine the matter, and we leave it open for future consideration.
It appears from the bill that, in pursuance of the powers given to it by this act, the state commission has made a body of rates for fares and freights. This body of rates, as a whole, is challenged by the plaintiff as unreasonable, unjust, and working a destruction of its rights of property. The defendant denies the power of the court to entertain an inquiry into that matter; insisting that the fixing of rates for carriage by a public carrier is a matter wholly within the power of the legislative department of the government, and beyond examination by the courts.
Budd v. New York, 143 U. S. 517, 12 Sup. Ct. 468, announces nothing to the contrary. The question there was not whether the rates were reasonable, but whether the businessthat of elevating grainwas within legislative control as to the matter of rates. It was said in the opinion: 'In the cases before us the records do not show that the charges fixed by the statute are unreasonable.' Hence, there was no occasion for saying anything as to the power or duty of the courts in case the rates, as established, had been found to be unreasonable. It was enough that, upon examination, it appeared that there was no evidence upon which it could be adjudged that the rates were in fact open to objection on that ground.
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 guaranty against the taking of private property for public purposes without just compensation. The equal protection of the laws, which, by the fourteenth amendment, no state can deny to the individual, forbids legislation, in whatever form it may be enacted, by which the property of one individual is, without compensation, wrested from him for the benefit of another, or of the public. This, as has been often observed, is a government of law, and not a government of men; and it must never be forgotten that under such a government, with its constitutional limitations and guaranties, the forms of law and the machinery of government, with all their reach and power, must, in their actual workings, stop on the hither side of the unnecessary and uncompensated taking or destruction of any private property, legally acquired and legally held. It was therefore within the competency of the circuit court of the United States for the western district of Texas, at the instance of the plaintiff, a citizen of another state, to enter upon an inquiry as to the reasonableness and justice of the rates prescribed by the railroad commission. Indeed, it was, in so doing, only exercising a power expressly named in the act creating the commission.
A classification was made by the commission, and different rates established for different kinds of goods. These rates were prescribed by successive circulars. Classification of rates is based on several considerations, such as bulk, value, facility of handling, etc. It is recognized in the management of all railroads, and no complaint is here made of the fact of classification, or the way in which it was made by the commission. By these circulars, rates all along the line of classification were reduced from those there tofore charged on the road. The challenge in this case is of the tariff as a whole, and not of any particular rate upon any single class of goods. As we have seen, it is not the function of the courts to establish a schedule of rates. It is not, therefore, within out power to prepare a new schedule, or rearrange this. Our inquiry is limited to the effect of the tariff as a whole, including therein the rates prescribed for all the several classes of goods, and the decree must either condemn or sustain this act of quasi legislation. If a law be adjudged invalid, the court may not, in the decree, attempt to enact a law upon the same subject which shall be obnoxious to no legal objections. It stops with simply passing its judgment on the validity of the act before it. The same rule obtains in a case like this.
It may not be just to take this as an allegation of a mere matter of fact, the truthfulness of which is admitted by the demurrer, and which, as thus admitted, eliminates from consideration all questions as to the true character and effect of the rates. Yet it is not to be ignored. There are often, in pleadings, general allegations of mixed law and fact, such as of the ownership of property and the like, which, standing alone, are held to be sufficient to sustain judgments and decrees, and yet are always regarded as qualified, limited, or even controlled, by particular facts stated therein. It would not, of course, be tolerable for a court administering equity to seize upon a technicality for the purpose, or with the result, of entrapping either of the parties before it. Hence, we should hesitate to take the filing of the demurrers to these bills as a direct and explicit admission on the part of the defendants that the rates established by the commision are unjust and unreasonable. Yet it must be noticed that at first answers were filed, tendering issue upon the matters of fact, and testimony was taken, the extent of which, however, is not disclosed by the record. After that the defendants applied for leave to withdraw their answers, and file demurrers. It is not to be supposed that this was done thoughtlessly. But one conclusion can be drawn from that action, and that is that, upon the taking of their testimony, defendants became satisfied that the particular facts were as stated in the bills, and that the conclusions to be drawn from such facts could not be overthrown by any other matters. Hence, if it appears that the facts stated in detail tend to prove that the rates are unreasonable and unjust, we must assume, as against the demurrers, that the general allegation heretofore quoted is true, and that there are no other and different facts, which, if proved, might induce a different conclusion, and compel a different result.
In the amendment to the cross bill, filed in March, 1893, is given a table showing the actual reductions in amounts received by the railroad company for the transportation of the different classes of goods under the operation of the new tariffs up to August 31, 1892, and amounting to $159,694.51, and also a table showing the per cent. of reductions as to different articles, varying from 5 per cent., on cement, to 54.90 per cent., on grain in car loads. The bill also, in general terms, negatives the probability of any increase in amount of business to compensate for the reduction in rates, a negation sustained by the figures given in the amended bill as to the actual effect upon the receipts. It also contains a general averment that the rates on interstate business would be injuriously affected to an equal amount by reason of the reduction of rates on business within the state.
accrued on bonds, taxes, etc. $ 45,569 74"
But this table ignores that which is disclosed in the cross bill, to wit, $750,000 in certificates of indebtedness, bearing interest at 5 per cent., and $1,250,000 third mortgage bonds, bearing 4 per cent. interest, the interest on which sums would exceed all the apparent surplus. These items also appear in the report, under the head of 'Current Liabilities,' the total balance of which on July 1, 1892, is given as $3,772,062.94, which sum may not unreasonably be taken as showing by how much the company has fallen short of paying its operating expenses and fixed charges. Again, the sum of $302,085.77 appears in that table, under the description 'Cost of road, equipment, and permanent improvements, admitted to have been included in operating expenses,' and is added to the income, as though it had been improperly included in operating expenses. But, before this change can be held to be proper, it is well to see what further light is thrown on the matter by other portions of the report. That states that there were no extensions of the road during that year, so that all of this sum was expended upon the road as it was. Among the items going to make up this sum of $302,085.77 is one of $113,212.09 for rails; and it appears from the same report that there was not a dollar expended for rails, except as included within this amount. Now, it goes without saying that in the operation of every road there is a constant wearing out of the rails, and a constant necessity for replacing old with new. The purchase of these rails may be called 'permanent improvements,' or by any other name, but they are what is necessary for keeping the road in serviceable condition. Indeed, in another part of the report, under the head of 'Renewals of Rails and Ties,' is stated the number of tons of 'new rails laid' on the main line. Other items therein are for fencing, grading, bridging, and culvert masonry, bridges and trestles, buildings, furniture, fixtures, etc. It being shown affirmatively that there were no extensions, it is obvious that these expenditures were those necessary for a proper carrying on of the business required of the company. Certainly, the mere title under which these expenditures are once stated, is not sufficient to overthrow the factsso fully and clearly shownthat the stockholders have never received any dividends; that in order to meet the accumulating interest on the bonds they have had to put their hands in their pockets, and advance a million and over of dollars. Those are facts whose significance cannot be destroyed by any mere manner of bookkeeping or classification of expenditures.
Further, the attorney general asserts that there are five trunk lines, of which the International & Great Northern road is one, paralleling each other, and thus dividing the business of the territory through which they pass; that the state of Texas had made large donations of land to railroad companies; and that, as appears from its executive documents, this railroad company had received a donation of 3,352,320 acres to aid in its construction, as well as exemption of all its property from taxation for 25 years. He also calls attention to the financial depression which has of late years pervaded every avenue of trade, and adds a table from the report of the commissioner of agriculture of Texas, showing, as to different articles produced in that state, an increase in the amount of product, and a decrease in the prices received therefor, all of which considerations, he earnestly insists, affect the question of the reasonableness of the rates prescribed.
None of the matters mentioned in the foregoing paragraph appear in the pleadings, or elsewhere in the record, and it is therefore doubtful to what extent they may be taken into consideration. If we may take judicial notice of the five parallel roads, must we also assume that the existence of the other four diminishes the business of the International & Great Northern, and that, if they had never been built, all the business which now passes over the five would have been carried by the one? May not the topography of the country be such as to prevent any of the business of the other roads from ever coming to the International & Great Northern, even if, without them, it was obliged to seek water or wagon trasportation? May not the building of those other roads have increased the population and business to such an extent that the overflow has, so far from diminishing, really resulted in an increase of, the business of the Internation & Great Northern? If there has been a division of business, has there not also been a competition by which the rates have been reduced, and reduced to such an extent as to forbid the propriety of any further reduction? If we may take judicial notice that the state made a grant of three million and odd acres to the company, must we also take notice of the value of that land, of its sale, and the amount realized therefrom? While, undoubtedly, there has been lately a period of financial depression, can we take judicial notice of the extent to which that depression has reduced the prices of the products of the state? And is the report of the commissioner of agriculture of the state to be considered as evidence before us, and accepted as substantially correct, both as to product and prices? And if the depreciation of prices, as stated in said report, be accepted as correct, will such depreciation uphold a compulsory reduction of the rates of transportation to such an extent that some of those who have invested their money in railroad transportation receive no compensation therefrom? Is it just to deprive one party of all compensation in order that another may make some profit? They who invest their money in railroads take the same chances that men engaged in other business do of making profit from the carrying on of their business; and, as appears from other cases submitted to us with this, some of the railroads in the state of Texas have been operated at a constant loss. But such possibilities of loss are simply the natural results of all business freely carried on, against which the law is powerless to afford protection. Very different are the considerations which arise when the strong arm of the law is invoked to compel parties engaged in legitimate business, and business which cannot be abandoned at will, to so reduce their charges for service as to make the carrying on of that business result in a continued loss. In the one case the law is powerless to prevent injury. In the other, it is used to work injury. Counsel suggest that the state itself may construct and operate railroads, and then may properly make rates so low that the business is done at a loss. They refer to the postal system of the United States, which, carried on for the common welfare, not infrequently results in a loss, which is made good out of the public treasury. But the parallel is not good. In the case suggested the loss is cast, through taxation, upon the general public, and all bear their proportionate share of that loss which is incurred in securing a common benefit, while the scope of this legislation is to secure such common benefit at the expense of a single class. The equal protection of the lawsthe spirit of common justice forbids that one class should, by law, be compelled to suffer loss that others may make gain. If the state were to seek to acquire the title to these roads under its power of eminent domain, is there any doubt that constitutional provisions would require the payment to the corporation of just compensation,that compensation being the value of the property as it stood in the markets of the world, and not as prescribed by an act of the legislature? Is it any less a departure from the obligations of justice to seek to take, not the title, but the use, for the public benefit, at less than its market value?
This section, as will be perceived, provides for the payment of interest at the high rate of 12 per cent. on the difference between what the company has paid out and what it has taken in, and to that extent evidences the thought of the state that justice required the return to the builders of railroads of something more than the actual cost, as the condition of depriving them of the title. It is only significant, however, as an expression of the thought of the state at the time; for, were the provision ever so unjust, every corporation which, after the passage of the act, invested its money in building a road, would do so with the knowledge that that was the condition upon which the investment was made, and could not, therefore, challenge its validity.
And now what deductions are fairly to be drawn from all the facts before us? Is there anything which detracts from the force of the general allegation that these rates are unjust and unreasonable? This clearly appears. The cost of this railroad property was $40,000,000. It cannot be replaced today for less than $25,000,000. There are $15,000,000 of mortgage bonds outstanding against it, and nearly $10,000,000 of stock. These bonds and stock represent money invested in the construction of this road. The owners of the stock have never received a dollar's worth of dividends in return for their investment. The road was thrown into the hands of a receiver for default in payment of the interest on the bonds. The earnings for the last three years prior to the establishment of these rates was insufficient to pay the operating expenses and the interest on the bonds. In order to make good the deficiency in interest, the stockholders have put their hands in their pockets, and advanced over a million of dollars. The supplies for the road have been purchased at as cheap a rate as possible. The officers and employes have been paid no more than is necessary to secure men of the skill and knowledge requisite to suitable operation of the road. By the voluntary action of the company the rate, in cents, per ton, per mile, has decreased in 10 years from 2.03 to 1.30. The actual reduction by virtue of this tariff in the receipts during the six or eight months that it has been enforced amounts to over $150,000. Can it be that a tariff which, under these circumstances, has worked such results to the parties whose money built this road, is other than unjust and unreasonable? Would any investment ever be made of private capital in railroad enterprises with such as the proffered results?
It is unnecessary to decide, and we do not wish to be understood as laying down as an absolute rule, that in every case a failure to produce some profit to those who have invested their money in the building of a road is conclusive that the tariff is unjust and unreasonable. And yet justice demands that every one should receive some compensation for the use of his money or property, if it be possible without prejudice to the rights of others. There may be circumstances which would justify such a tariff. There may have been extravagance, and a needless expenditure of money. There may be waste in the management of the road. enormous salaries, unjust discrimination as between individual shippers, resulting in general loss. The construction may have been at a time when material and labor were at the highest price, so that the actual cost far exceeds the present value. The road may have been unwisely built, in localities where there is no sufficient business to sustain a road. Doubtless, too, there are many other matters affecting the rights of the community in which the road is built, as well as the rights of those who have built the road. But we do hold that a general averment in a bill that a tariff, as established, is unjust and unreasonable, is supported by the admitted facts that the road cost far more than the amount of the stock and bonds outstanding; that such stock and bonds represent money invested in its construction; that there has been no waste or mismanagement in the construction or operation; that supplies and labor have been purchased at the lowest possible price consistent with the successful operation of the road; that the rates voluntarily fixed by the company have been for 10 years steadily decreasing, until the aggregate decrease has been more than 50 per cent.; that, under the rates thus voluntarily established, the stock, which represents two-fifths of the value, has never received anything in the way of dividends, and that for the last three years the earnings above operating expenses have been insufficient to pay the interest on the bonded debt, and that the proposed tariff, as enforced, will so diminish the earnings that they will not be able to pay one-half the interest on the bonded debt above the operating expenses; and that such an averment, so supported, will, in the absence of any satisfactory showing to the contrary, sustain a finding that the proposed tariff is unjust and unreasonable, and a decree restraining it being put in force.
It follows from these considerations that the decree, as entered, must be reversed, in so far as it restrains the railroad commission from discharging the duties imposed by this act, and from proceeding to establish reasonable rates and regulations, but must be affirmed so far only as it restrains the defendants from enforcing the rates already established. The costs in this court will be divided. Decree accordingly.
RAILROAD AND WAREHOUSE COMMISSION OF MINNESOTA et al. v. DULUTH STREET RY. CO.
RAILROAD COMMISSION OF CALIFORNIA et al. v. PACIFIC GAS & ELECTRIC CO.
WEST et al. v. CHESAPEAKE & POTOMAC TELEPHONE CO. OF BALTIMORE CITY.
OLSON v. UNITED STATES. KARLSON v. SAME. BREWSTER v. SAME.
CENTRAL KENTUCKY NATURAL GAS CO. v. RAILROAD COMMISSION OF KENTUCKY et al.
CHICAGO, R. I. & P. RY. CO. et al. v. UNITED STATES et al.
SOUTHERN PACIFIC COMPANY and Oregon & California Railroad Company, Appts., v. THOMAS K. CAMPBELL et al., Constituting the Railroad Commission of Oregon, et al.
SAN DIEGO LAND & TOWN CO. v. CITY OF NATIONAL CITY et al.
LAKE SHORE & M. S. RY. CO. v. SMITH.
INTERSTATE COMMERCE COMMISSION v. CINCINNATI, N. O. & T. P. RY. CO. et al.
ST. LOUIS & S. F. RY. CO. v. GILL. SAME v. STEVENSON. SAME v. TRIMBLE. SAME v. CARTER.
DAVIS & FARNUM MANUFACTURING COMPANY, v. CITY OF LOS ANGELES.
LOUISVILLE & NASHVILLE RAILROAD COMPANY, v. COMMONWEALTH OF KENTUCKY.
R. J. DARNELL, Appt., v. GEORGE R. EDWARDS, F. M. Sheppard, and W. B. Wilson, Constituting the Mississippi Railroad Commission.
UNITED STATES v. BOARD OF COM'RS OF OSAGE COUNTY, OKL., et al.
SOUTHERN IOWA ELECTRIC CO. v. CITY OF CHARITON, IOWA, et al. IOWA ELECTRIC CO. v. CITY OF FAIRFIELD, IOWA, et al. MUSCATINE LIGHTING CO. v. CITY OF MUSCATINE, IOWA et al.
UNITED STATES of America, Petitioner, v. TWIN CITY POWER COMPANY and William P. Dauchy, Its Mortgagee.
HONOLULU RAPID TRANSIT & LAND COMPANY, Appt., v. TERRITORY OF HAWAII, by Charles R. Hemenway, Attorney General of the Territory of Hawaii.
SOUTH UTAH MINES & SMELTERS v. BEAVER COUNTY.
STATE OF MISSOURI ex rel. SOUTHWESTERN BELL TELEPHONE CO. v. PUBLIC SERVICE COMMISSION OF MISSOURI et al.

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