Case Name: Minneapolis, St. Paul & Sault Ste. Marie Railway Company, Appellant, vs. Menasha Wooden Ware Company, Respondent
Court: Wisconsin Supreme Court
Jurisdiction: Wisconsin
Decision Date: 1914-12-08
Citations: 159 Wis. 130
Docket Number: 
Parties: Minneapolis, St. Paul & Sault Ste. Marie Railway Company, Appellant, vs. Menasha Wooden Ware Company, Respondent.
Judges: Makshall, J., dissents.
Reporter: Wisconsin Reports
Volume: 159
Pages: 130–140

Head Matter:
Minneapolis, St. Paul & Sault Ste. Marie Railway Company, Appellant, vs. Menasha Wooden Ware Company, Respondent.
November 19 —
December 8, 1914.
Railroads: Regulation of rates by state: Revocation of power granted to companies: Statute construed: Prior special contracts superseded: Constitutional law: Impairing obligation of contracts.
1. Under the Railroad Commission Law (ch. 362, Laws of 1905; secs. 1797 — 1 to 1797 — 36, Stats.) railroad rates within the state must he reasonable, just, and nondiscriminating', and apply to all shippers alike within the territory and for the commodity covered by the tariff rates.
2. The power to regulate the compensation to he paid for their services, granted to railroad companies by sub. 9, sec. 1828, Stats. 1898, was subject to the right of the state to amend or annul it; and all contracts made pursuant thereto by railroad companies were subject to be superseded whenever the state should resume the exercise of its sovereign power to regulate rates.
3. When,- therefore, pursuant to the Railroad Commission Law, a railway company filed its tariffs covering rates for the transportation of freight as to which a special contract then existed, such contract became inoperative.
4. In so far as there is language in the opinion in Superior v. Douglas Go. T. Go. 141 Wis. 363, to the effect that a contract for a public utility rate made prior to the passage of the Public Utility Law would be saved by the constitutional prohibition against laws impairing the obligation of contracts, irrespective of sec. 1797m — 91, Stats., it is disapproved.
5. That part of sec. 1797 — 6, Stats., providing that nothing in the Railroad Commission Act shall be construed to prevent “transit and other special contract rates,” refers to rates to he made thereafter under the supervision and regulation of the commission and complying with the requirements of that section, and does not relate to special contracts existing at the time the law took effect.
Makshall, J., dissents.
Appeal from a judgment of the circuit court' for Winnebago county: Geo. W. BuRnell, Circuit Judge.
Reversed.
Action to recover the tariff freight charges on carload shipments of logs and wood holts from various points in the state to Ladysmith carried over plaintiff’s road between June 1, 1911, and March 1, 1912. So far as affecting any question decided upon the appeal the facts are these: On December 15, 1899, the parties entered into ,a contract in the form of an offer and acceptance which read:
“That in consideration of your making us a rate of 8c per hundred pounds, minimum of 30,000 pounds on staves and heading from Warner to Prentice and $3 per car on logs and bolts from McCord to Warner and the same rate west of Warner as far as McCord is east of Warner on logs and bolts, with the understanding that the freight on lumber to general markets from Warner will not average any higher than that from Chippewa Balls and that any of our pine timber that we have between Gagen and Bhinelander, you will be willing to haul to either Prentice or Pembine at $1 per thousand. Minimum on logs 5,000 feet per car and on bolts twelve cords per car.
“We propose to put in a mill as soon as it can be done in the spring at Warner. This, of course, is with the understanding that you will put in the necessary sidings for our mill at Warner and sidings where we desire to make shipments of logs and bolts where shipments would warrant, the understanding being that we furnish the right of way, grading and ties.
“The above rates are to hold good as long as we own and operate the mill at Warner.”
Warner is now called Ladysmith and McCord is about sixty miles east of Ladysmith. The rate named in the contract was observed by the parties until June 1, 1911, except that from 1907 defendant paid $4 per car, because of the'increased sizq of cars in common use. This modification was consented to by both parties as a proper construction of the contract. February 27, 1911, the plaintiff sent notice to defendant that tariffs covering the shipments in question would be filed with the Wisconsin railroad commission and freight charged pursuant' to the tariffs and not under the contract. Subsequently tariffs were filed with the Wisconsin railroad commission covering the period between June 1, 1911, and March 1, 1912. These tariffs placed all Wisconsin shippers on the same basis, and exceeded the contract price, but provided for only a reasonable rate.
Plaintiff claims the contract was superseded by the Wisconsin Kailroa'd Commission Law and by the tariffs filed pursuant thereto. The defendant claims the contract is still in force and controls the price that it should pay. The circuit court held that the contract' was still in force and governed the freight rate, and it entered a judgment in favor of plaintiff for the freight due under the contract, to wit, $113.09, in-, stead of for the sum of $3,217.04, due under the tariffs, and enjoined plaintiff from refusing to haul under the contract rate. From such judgment the plaintiff appealed.
For the appellant there was a brief by Silas Bullard, W. A. Hayes, and Kenneth Taylor,,attorneys, and Alfred H. Bright, of counsel, and oral argument by Mr. Taylor and Mr. Bright.
For the respondent there was a brief by Thompson, Thompson & Jachson, and oral argument by J. 0. Thompson.

Opinion:
VxNje, J.
That' it was the avowed purpose of ch. 362, Laws of 1905 (secs. 1797 — 1 to 1797 — 36, Stats.), and the acts amendatory thereof, known as the Wisconsin Railroad Commission Act, to secure nondiscriminating, just, and reasonable rates for all services rendered by railroads as common carriers of persons and property within the state is so plain from tbe language of tlie act as not to admit of serious doubt. Sec. 1797 — 3 provides:
'Every railroad is hereby required to furnish reasonably adequate service and facilities, and the charges made for any service rendered or to be rendered in the transportation of passengers or property or for any service in connection therewith, or for the receiving, switching, delivering, storing or handling of such property, shall be reasonable and just, and every unjust and unreasonable charge for such service is prohibited and declared to be unlawful."
Sec. 1797 — 23 declares any undue or unreasonable preference or advantage -or disadvantage to any person, firm, or corporation unlawful and prohibits the same; and sec. 1797 — 24 penalizes rebates, concessions, or discriminations in respect to the transportation of any property within the state. Treble damages are provided for in behalf of the person, firm, or corporation injured thereby in addition to the penalty accruing to the state. Sec. 1797 — 25. These provisions taken in connection with the whole scheme of the act unmistakably point to the conclusion that railroad rates within the state should, after the act took effect, be reasonable, nondiscriminating, and apply to all shippers alike within the territory and for the commodity covered by the tariff rates.
The question therefore arises whether or not the contract between the parties was superseded by the Railroad Commission Act and the filing of tariffs affecting the freight in question in accordance with the provisions of such act. The defendant claims that its contract was in no wise affected by the enactment of the act and the filing by plaintiff of tariffs thereunder, because the contract, being valid when made, could not' by reason of the provisions of the federal and state constitutions prohibiting the passage of any law impairing the obligations of contracts be invalidated by any legislative act. And it relies especially upon the case of Superior v. Douglas Co. T. Co. 141 Wis. 363, 122 N. W. 1023, as being decisive of tbe correctness of the position taken. It further claims that in any event sec. 1791 — 6 saves the contract, because that section in its terms saves transit and special contract rates.
Does the Railroad Commission Act, irrespective of sec. 1197 — -6, and the filing of tariffs thereunder covering the transportation provided for in the contract supersede it? That it would be superseded except for the constitutional provisions above referred to is quite plain. The act provided that the lowest schedule of rates in force in April, 1905, should constitute the lawful schedule of rates until changed by the filing of other tariffs. Sec. 1797 — 35. Sec. 1797 — 4 makes it' the duty of every railroad to file with the commission a full schedule of rates in force for all services rendered by it within the state. And sub. (c) thereof declared:
"It shall be unlawful for any railroad to charge, demand, collect or receive a greater or less compensation for the transportation of passengers or property or for any service in connection therewith than is specified in such printed schedules, including schedules of joint rates, as may at the time be in force, and the rates, fares and charges named therein shall be the lawful rates, fares and charges until the same are changed as herein provided."
So it is plain as stated in Frank A. Graham Ice Co. v. C., M. & St. P. R. Co. 153 Wis. 145, 140 N. W. 1097, that the legislature intended to and did provide' for an exclusive method of fixing freight rates, in so far as it could constitutionally do so.
The contract relied upon by the defendant was entered into pursuant to the provisions of sub. 9 of sec. 1828, Stats. 1898, which gave the railroad company the right to regulate the compensation to be paid for transporting passengers and property, and it is conceded by plaintiff that it was valid when made. The corporate power thus granted to the plaintiff to regulate the compensation to be paid for its services was granted subject to the right of the state to amend or annul it. There was no absolute irrevocable grant of power to the railroad company to forever regulate rates, but only a grant of power to be exercised by it' until modified, amended, or resumed by the state. The power to regulate the rates of common carriers is a sovereign power of the state. Milwaukee E. R. & L. Co. v. Railroad Comm. 153 Wis. 592, 142 N. W. 491. And every contract made as to such rates with a corporation authorized to contract in reference thereto is made with the knowledge of and subject to the right' of the state at any time to resume the exercise of such sovereign power. The legislative right to supersede it is as clear as though it were written into the contract' itself, for the law implies it. This was expressly held in Milwaukee E. R. & L. Co. v. Railroad Comm., supra, and as there stated was involved in the decision in Manitowoc v. Manitowoc & N. T. Co. 145 Wis. 13, 129 N. W. 925, only in the latter case it was held the state had not exercised its power to act. To construe sub. 9 of see. 1828, Stats. 1898, as authorizing railroad companies to make contracts for rates binding tipon the state when it resumes its rate-making power woidd be to hold that the legislature could part with an attribute of sovereignty. This it cannot do. In a democracy there can be no abdication. Sovereignty is not subject to a perpetual gift, grant, or barter. A perpetual grant under sovereign power may be made, but not a perpetual grant of sovereign power. The railroad company was but an agency of the state in regulating rates, and as such it had no authority to enter into a contract not subject to modification or revocation by the state. Manitowoc v. Manitowoc & N. T. Co. 145 Wis. 13, 129 N. W. 925; La Crosse v. La Crosse G. & E. Co. 145 Wis. 408, 130 N. W. 530; Kenosha v. Kenosha H. T. Co. 149 Wis. 338, 135 N. W. 848. Federal authorities are to the same effect. It has been uniformly held by the supreme court of the United States that contracts between private parties and common carriers fixing compensation to be paid for transportation, though made under state or federal authority, are made subject' to the right of the state or of Congress to modify or annul them under their sovereign power to regulate rates. Georgia R. & B. Co. v. Smith, 128 U. S. 174, 9 Sup. Ct. 47; Armour P. Co. v. U. S. 209 U. S. 56, 28 Sup. Ct. 428; Louisville & N. R. Co. v. Mottley, 219 U. S. 461, 31 Sup. Ct. 265; Portland R., L. & P. Co. v. Railroad Comm. 229 U. S. 397, 33 Sup. Ct. 820. To the same effect is Seaman v. M. & R. R. R. Co. (Minn.) 149 N. W. 134, a ease almost identical with the one at bar.
As pointed out in Kenosha v. Kenosha H. T. Co. 149 Wis. 338, 135 N. W. 848, the contract in the case of Superior v. Douglas Co. T. Co. 141 Wis. 363, 122 N. W. 1023, was in fact saved by the provisions of sec. 1797m — 91 exempting existing contracts from the provisions of the Public Utility Act as to discrimination, whether or not the opinion in the case based it upon that ground. In so far as there is language in that opinion to the effect that a contract for a public utility rate made prior to the passage of the Public Utility Law would be saved by the constitutional prohibition against laws impairing the obligations of contracts, irrespective of the exempting part of the law referred to, it is disapproved.
AAThen the plaintiff filed its tariffs covering the freight rates for the transportation of the freight included in the contract, the latter became inoperative. -The state had then, through the instrumentality and by the method by it prescribed, fixed another rate which became the only lawful rate till changed as provided for in the act. There was no change made in the tariffs filed during the period the freight in question was transported.
Sec. 1797 — 6 provides:
"Nothing in'sections 1797 — 1 to 1797 — 38, inclusive, shall be construed to prevent concentration, commodity, transit and other special contract rates, but all such rates shall be open to all shippers for a like kind of traffic under similar circumstances and conditions, and shall be subject to the provisions of sections 1797 — -1 to 1797 — -38, inclusive, as to the printing and filing of the same. Provided, all such rates shall be under the supervision and regulation of the commission."
The claim that this contract is saved under the clause "transit and other special contract rates" is not well taken. The section quoted refers to rates made'in the future under the - supervision and regulation of the commission and complying with the requirements of the section. It does not relate to special contracts existing at the time the law took effect. The very purpose of the act was to abolish all existing private, secret, and special contracts and traffic arrangements and to place all shippers in future upon an equality so far as practicable. The abuses under the old system consisted chiefly in favored shippers and favored^localities, resulting in discrimi-nations and inequalities enabling the favored shippers to crash competition and the favored localities to thrive at the expense of those less favored. These were some of the more important abuses the act sought to abolish. It's effect would in a large measure be rendered nugatory had existing contracts and tariff agreements been preserved. In order to strike at the root' of the evil it was necessary for the state to resume full control of its rate-regulating power and to start ^with a clean slate. This it did by providing that' in future all railroad transportation rates within the state should be under the supervision and control of the commission, subject to the provisions of law relative thereto. As to the invalidity generally of contracts inconsistent with published tariffs, see 4 Ruling Case Law, 603 et seq. and cases cited.
The circuit court should have entered judgment for the amount of the tariff rate, viz. $3,217.04, less any payments made thereon, with interest on such sum from March 16, 1912, the time of the commencement of the action.
By the Court. — Judgment reversed, and cause remanded with directions to enter judgment as indicated in the opinion.