Case Name: CHICAGO, MILWAUKEE & ST. PAUL RY. CO., Respondent, v. BOARD OF RAILROAD COMMISSIONERS, Appellant
Court: Montana Supreme Court
Jurisdiction: Montana
Decision Date: 1926-05-20
Citations: 76 Mont. 305
Docket Number: No. 5,884
Parties: CHICAGO, MILWAUKEE & ST. PAUL RY. CO., Respondent, v. BOARD OF RAILROAD COMMISSIONERS, Appellant.
Judges: 'Associate Justices Holloway, Galen, StaRK and Matthews concur.
Reporter: Montana Reports
Volume: 76
Pages: 305–320

Head Matter:
CHICAGO, MILWAUKEE & ST. PAUL RY. CO., Respondent, v. BOARD OF RAILROAD COMMISSIONERS, Appellant.
(No. 5,884.)
(Submitted April 27, 1926.
Decided May 20, 1926.)
[247 Pac. 162.]
Messrs. Murphy & Whitlock, for Respondent, submitted a brief; Mr. A. N. Whitlock argued the cause orally. .
Mr. E. G. Toomey, for Appellant, submitted a brief, and argued the cause orally.

Opinion:
MR. CHIEF JUSTICE CALLAWAY
delivered tbe opinion of tbe court.
Tbis action was brought by tbe plaintiff railway company in tbe district court of Silver Bow county (tbe city of Butte being tbe principal place of business of plaintiff in Montana) to review and annul an order of tbe defendant board directing tbe installation of an industrial spur-track near Roundup and to enjoin further proceedings thereunder. Tbe board filed a general demurrer to tbe complaint, which being overruled, it refused to plead further. Thereupon defendant's default was entered and judgment was entered in favor of the plaintiff, from which the board has appealed.
At tbe threshold we observe that while tbe board of railroad commissioners is a public agency of dignity and importance, vested with extensive powers and duties, and whose acts are valid prima facie (sec. 3809, Rev. Codes 1921; State ex rel. Board of Railroad Commissioners v. District Court, 53 Mont. 229, 163 Pac. 115), it has such powers and such only as are conferred upon it by statute either expressly or by necessary implication.
Counsel agree that the order complained of is based upon section 3833, Revised Codes of 1921, which reads as follows: "The board of railroad commissioners of the state of Montana shall have power and authority; after such investigation as they may deem necessary, and under such rules and regulations as they may establish with reference thereto, to compel railroads or railways or other companies or corporations operating and holding themselves out to be common carriers in the state of Montana, to extend or construct commercial or industrial spurs from constructed lines or tracks at stations or from within station limits; provided, the length of such commercial or industrial spurs or tracks shall be not to exceed two miles from tbe headblock to end of track." This statute is attacked by the plaintiff as unconstitutional upon several grounds, the chief of which is that it assumes to delegate legislative powers to the board of railroad commissioners. With this main objection the others are interwoven.
The difficulty of defining the line which separates legislative power to make laws from administrative authority to make regulations has frequently been the subject of controversy. (United States v. Grimaud, 220 U. S. 506, 55 L. Ed. 563, 31 Sup. Ct. Rep. 480 [see, also, Rose's U. S. Notes]; Cook v. Burnquist, 242 Fed. 321.) Decisions touching the question more or less thoroughly are many, and are far from harmonious. (State ex rel. Chicago, M. & St. P. Ry. Co. v. Public Service Commission, 94 Wash. 274, 162 Pac. 523.) The general rule of course is that neither Congress, nor the legislature (unless the Constitution of the particular state so authorizes, and Montana's does not), may delegate legislative power. Congress, it has been said, and the rule is applicable here; "may not delegate the choosing of policies nor the duty of formally enacting the policy of the law, but it may formulate the policy as broadly and with as much or as little detail as it sees proper and it may delegate thé duty of working out the details and the application of the policy to the situation it was intended to meet." (John B. Cheadle, The Delegation of Legislative Functions, 27 Yale Law Journal, 892.)
Mr. Justice Lumpkin, speaking for the supreme court of Georgia in Southern Ry. v. Melton, 133 Ga. 277, 65 S. E. 665, said: "Unless the legislature could pass an Act outlining the governing principles in somewhat general terms and leave the railroad commission to fill in the details the power of the legislature on the subject would be practically useless and impossible of execution." (And see, generally: Atlantic Coast Line R. R. Co. v. North Carolina Corp. Com., 206 U. S. 1, 11 Ann. Cas. 398, 51 L. Ed. 933, 27 Sup. Ct. Rep. 585 [see, also, Rose's U. S. Notes]; Louisville & N. R. Co. v. Garrett, 231 U. S. 298, 58 L. Ed. 229, 34 Sup. Ct. Rep. 48; State v. Atlantic Coast Line R. R. Co., 56 Fla. 617, 32 L. R. A. (n. s.) 639, 47 South. 969; State v. Public Service Com., 270 Mo. 547, 194 S. W. 287; St. Louis I. M. & S. Co. v. State, 99 Ark. 1, 136 S. W. 938.)
Mr. Justice Harlan, in Union Bridge Co. v. United States, 204 U. S. 364, 51 L. Ed. 523, 27 Sup. Ct. Rep. 367, declared that "a denial of the right to delegate the power to determine some fact or the state of things upon which the enforcement of an Act depends would he to 'stop the wheels of government' and bring about confusion if not paralysis, in the conduct of public business." And, it may be added, that a denial of the right would go far towards abnegating the power of the state over public utilities. The ultimate doctrine of the Union Bridge Case seems to have been followed consistently by the supreme court of the United States. (United States v. Grimaud, supra; Wichita R. R. v. Public Utilities Com., 260 U. S. 48, 67 L. Ed. 124, 43 Sup. Ct. Rep. 51.) The last-cited case arose over an order made by the defendant Public Utilities Commission of Kansas. The order was declared void. In the course of the opinion Mr. Chief Justice Taft said: "The maxim that a legislature may not delegate legislative power has some qualifications, as in the creation of municipalities, and also in the creation of administrative boards to apply to the myriad details of rate schedules the regulatory police power of the state. The latter qualification is made necessary in order that the legislative power may be effectively exercised. In creating such an administrative agency the legislature, to prevent its being a pure delegation of legislative power, must enjoin upon it a certain course of procedure and certain rules of decision in the performance of its function. It is a wholesome and necessary principle that such an agency must pursue the procedure and rules enjoined and show a substantial compliance therewith to give validity to its action."
Necessarily, the extent of the course of procedure and of the rules of decision are for the determination of the legislature. We think the correct rule as deduced from the better author! ties is that if an Act bnt authorizes the administrative officer or board to carry out the definitely expressed will of the legislature, although procedural directions and the things to be done are specified only in general terms, it is not vulnerable to the criticism that it carries a delegation of legislative power.
But the power must not be so arbitrary in character as to transgress the "due process clause" of the state or national Constitution. It would be difficult to couch a statute in more general terms than those employed in the one we are considering. Counsel for plaintiff are justified in saying that whether or not a hearing shall be ordered and the carrier afforded an opportunity to introduce testimony relative to the necessity or propriety of an order requiring construction, or whether the investigation shall be ex parte, is left entirely to the board itself. The statute does not undertake, even in the most general terms, to prescribe the conditions under which the board may compel the carrier to construct a spur. It does not provide that the board may issue its order when reasonable public necessity requires it; there is no indicated rule of decision. It does not require as a condition to the making of the order that the board shall give the carrier notice and a hearing; it does not contain even that procedural direction. On the contrary, it assumes to authorize the board only after such investigation as they may deem necessary, and under such rules and regulations as they may establish with reference thereto to compel common carriers to extend and construct commercial or industrial spurs.
The intention of the legislature in passing this statute is not easy to determine. Did it intend to depart from a well-established policy? When Chapter 135 of the Laws of 1917, now section 3833, supra, was passed, Chapter 136 of the Laws of 1909 (Session Laws 1909, p. 204) sections 3827 to 3832, inclusive, Revised Codes of 1921, was upon the statute books. Sections 3827, 3828 and 3829 assumed to confer authority upon the Railroad Commission to do certain acts, using the express words "after notice and hearing." Section 3829 assumed to give the commission authority to compel railroad companies to construct certain industrial or commercial spurs, "after notice and hearing." The applicability of section 3829 to the present proceeding has neither been suggested nor argued by counsel and we expressly reserve an opinion with respect to it. If, however, the legislature in enacting Chapter 135 of the Laws of 1917, now 3833, intended to substitute that section for 3829, it would appear that it intended to do away with the provision for notice and hearing and to substitute in lieu thereof the discretion of the board; in effect permitting that body to determine whether it would give notice of the proceeding and whether it would accord to the carrier a hearing.
When we conceive that the board's order to the carrier to construct the spur-track is in effect a taking of property, for it requires the carrier to use its property and spend its monejr (State of Washington ex rel. R. & N. Co. v. Fairchild, 224 U. S. 510, 56 L. Ed. 863, 32 Sup. Ct. Rep. 535 [see, also, Rose's U. S. Notes]), it would seem clear that an order to the carrier made without notice and without a hearing in effect would deprive the carrier of its property without due process of law. Before a valid order of the character in question can be made we hold that notice and opportunity to be heard is indispensable. (Missouri Pac. Ry. v. Nebraska, 217 U. S. 196, 18 Ann. Cas. 989, 54 L. Ed. 727, 30 Sup. Ct. Rep. 461; Union Lime Co. v. Railroad, 144 Wis. 523, 129 N. W. 605; Wichita R. & L. Co. v. Public Utility Com., supra.)
While it is true, abstractly, that notice and opportunity for a hearing are not essential to the validity of legislative enactments, such legislation nevertheless may be invalid as violative of the Fourteenth Amendment because arbitrary, unjust and unreasonable. A statute which undertakes to deprive a person of his property without notice and opportunity to be heard certainly is invalid. (Chicago, M. & St. P. R. Co. v. Minnesota, 134 U. S. 418, 33 L. Ed. 970, 10 Sup. Ct. Rep. 462; 3 Interstate Com. Rep. 209.)
The legislature itself may not deprive a person of his property without due process of law and with reason quite as strong it cannot authorize its creature to do what it cannot do itself.
In Stuart v. Palmer, 74 N. Y. 183, an oft-quoted ease, the court said that the due process of law provision "is the most important guaranty of personal rights to be found in the federal or state Constitution. It is a limitation upon arbitrary power, and is a guaranty against arbitrary legislation. No citizen shall arbitrarily be deprived of his life, liberty, or property. This the legislature cannot do nor authorize to be done. 'Due process of law,' is not confined to judicial proceedings, but extends to every case which may deprive a citizen of life, liberty, or property, whether the proceeding be judicial, administrative, or executive in its nature. (Weimer v. Brueinbury, 30 Mich. 201.) This great guaranty is always and everywhere present to protect the citizen against arbitrary interference with these sacred rights."
Whatever may be the rule generally, where the taking of property is involved extra-official or casual notice of a hearing-granted as a matter of favor or discretion cannot be deemed a substantial substitute for the due process of law the Constitution requires. This is the holding of the supreme court of the United States in Coe v. Armour Fertilizer Works, 237 U. S. 413. The court also said: "In Stuart v. Palmer, 74 N. Y. 183, which involved the validity of a statute providing for assessing the expense of a local improvement upon the lands benefited, but without notice to the owner, the court said: 'It is not enough that the owners may by chance have notice, or that they may as a matter of favor have a hearing. The law must require notice to them, and give them the right to a hearing and an opportunity to be heard.' The soundness of this doctrine has repeatedly been recognized by this court. Thus, in Security Trust Co. v. Lexington, 203 U. S. 323, 333, the court, by Mr. Justice Pechham, said, with respect to an assessment for back taxes: 'If the statute did not provide for a notice in any form, it is not material that as a matter of grace or favor notice may have been given of the proposed assessment. It is not what notice, uncalled for by the statute, the taxpayer may have received in a particular case that is material, but the question is, whether any notice is provided for by the statute,' (citing the New York case). So in Central of Georgia Ry. v. Wright, 207 U. S. 127, 138, the court said: 'This notice must be provided as an essential part of the statutory provision and not awarded as a mere matter of favor or grace.' In Roller v. Holly, 176 U. S. 398, 409, the court declared: 'The right of a citizen to due process of law must rest upon a basis more substantial than favor or discretion.' And in Louisville & Nash. R. R. v. Stock Yards Co., 212 U. S. 132, 144, it was said: 'The law itself must save the parties' rights, and not leave them to the discretion of the courts as such.' "
The constitutional validity of a law is to be tested not by what has been done under it, but by what may he done under it. (State ex rel. Redman v. Meyers, 65 Mont. 124, 210 Pac. 1064; State ex rel. Holliday v. O'Leary, 43 Mont. 157, 115 Pac. 204.) It must be borne in mind that the board of railroad commissioners is not a mere fact finding instrumentality of the government. It is a guasi-judieial body with power to hear and determine controversies and to make lawful orders based upon its findings.
Where property is sought to be taken under an administrative regulation "the defendant must not be denied the right to show that, as matter of law, the order is so arbitrary, unjust and unreasonable as to amount to a deprivation of property in violation of the Fourteenth Amendment. (Chicago, M. & St. P. S. Co. v. Minnesota, 134 U. S. 418, 33 L. Ed. 970, 3 Inters. Com. Rep. 209, 10 Sup. Ct. Rep. 462 [see, also, Rose's U. S. Notes] ; Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. Rep. 418; Chicago, M. & St. P. R. Co. v. Tompkins, 176 U. S. 173, 44 L. Ed. 420, 20 Sup. Ct. Rep. 336.) " (Fairchild Case, supra; Mont. Const., Art. III, sec. 27.)
"The hearing which must precede the taking of property is not a mere form. The carrier must have the right to secure and present evidence material to the issue under investigation. It must be given the opportunity by proof and argument to controvert the claim asserted against it, before a tribunal bound, not only to listen but to give legal effect to what has been established." (Fairchild Case, supra.)
This statute, we think, comes within the denunciation expressed in Yick Wo v. Hopkins, 118 U. S. 356, 30 L. Ed. 220, 6 Sup. Ct. Rep. 1064, where the court said: "The power given to the administrative officers is not confided to their discretion in the legal sense of that term but is granted to their mere will. It is purely arbitrary, and acknowledges neither guidance nor restraint."
We have been discussing the character of the statute, not the actions of the board. It is fair to say the board was duly mindful of the necessity of notice and hearing.
The plaintiff further urges that the statute is unconstitutional for the reason that it purports to authorize the board to compel the construction of spurs regardless of whether they are public or private in character. If this were the only objection- to the statute we should not hestitate to pronounce it constitutional under the rule that if a statute is susceptible of two constructions, one of which will render it constitutional and the other unconstitutional, the court will prefer the former (State ex rel. Northern Pac. Ry. Co. v. Duncan, 68 Mont. 420, 219 Pac. 638). Beyond doubt it is within the province of the legislature to empower the board, public necessity appearing, to require railroad companies to construct spur-tracks for public purposes, although it cannot do so for private purposes. We should hold that the statute authorized that which was lawful and not that which was unlawful.
This disposition of the case makes it unnecessary to discuss the other points presented by counsel.
For the reasons foregoing, however, the statute cannot be sustained; it is unconstitutional beyond a reasonable doubt. The action of the district court in overruling the demurrer was right and its judgment is affirmed.
Affirmed,.
'Associate Justices Holloway, Galen, StaRK and Matthews concur.
Rehearing denied June 11, 1926.