Railway Co. v. Gill

11 L.R.A. 452, 15 S.W. 18, 54 Ark. 101, 1891 Ark. LEXIS 6

• Court: Supreme Court of Arkansas
• Decided: January 3, 1891
• Status: Published

Opinion

Hemingway, J.

The questions presented by this appeal depend upon the sufficiency of ten several paragraphs of the answer of the defendant below, appellant here, to each of which a demurrer was sustained. There was a trial upon one paragraph, and verdict and judgment for the plaintiff.

1. Legislative In the second paragraph it was alleged that the act of April 4, 1887, entitled an act to regulate the rates to be charged by railroads for the carriage of passengers, was not passed by the several houses of the general assembly in accordance with their joint rules, and that the bill as passed did not contain any provision limiting the rates that could be charged for the transportation of passengers. The joint rules of the general assembly were creatures of its own, to be maintained and enforced, rescinded, suspended, or amended, as it might deem proper. Their observance was a matter entirely subject to legislative control and discretion, not subject to be reviewed by the courts. That the act as passed contained a clause limiting passenger rates, was settled by this court in Dow v. Beidelman, 49 Ark., 325.

2. Voluntary overcharge. The substance of the ninth paragraph is that the appellee voluntarily paid the alleged overcharge, and that he therefore could not recover. Whether the conclusion would follow if he sought to recover the amount of the overcharge,, we need not decide; a voluntary payment of the overcharge does not preclude a recovery of the statutory penalty,

tioñ of u*enaT ties-The paragraph sets up that the plaintiff went upon the defendant’s train, not for the purpose of ordinary business or pleasure, but for the sole purpose of accumulating penalties against it, and that it would be against public policy to allow him to maintain this action, and thereby speculate in penalties. The act was not intended to provide a compensation for the injured passenger; but to deter railroad companies from taking excessive fares by punishing every such act. Each overcharge is in violation of law, and every payment of it is a legal wrong to the party making it, who-is thereby aggrieved within the meaning of the act, and by its express terms entitled to sue. Fisher v. Ry. Co., 46 N Y., 644; Parks v. Nashville, etc., Ry., 13 Lea, 1; S. C., 18 A. & E. R. R. Cas., 404.

4. Con gressional grants— State^reguTatlon In the sixth paragraph it is alleged that, bv virtue of A ° *• ° var‘ous acts °f Congress, the line of defendant’s road is dedared a post and military route and national highway for postal, military and all other governmental services, and is subject to be regulated only by act of Congress ; that it became such by grants of land and right of way from the government, and is thereby exempt from State regulation. We do not appreciate the force of this defense. We do not understand that a grant of lands or of a right of way over lands by the government confers immunity from State regulation upon its grantee.

The remaining paragraphs of the answer contain objections by which, as it is claimed, the act in question is shown to be in conflict with the provisions of the State and Federal constitutions. As they contain many repetitions of the same allegations, varying only in the different paragraphs in respect of form, we will state and consider them together. They are substantially as follows : That the alleged overcharges were made for passage on that part of the defendant’s road formerly owned by the St. Louis, Arkansas and Texas Railway Company in Arkansas; that said company was duly organized under the general laws of the State of Arkansas in 1880; that, by the laws then in force, and which were a part of its contract with the State, it was provided that said corporation, its successors or assigns, might fix such rates of fare as to it should seem proper, but that the legislature might alter or reduce its rates, provided that no such reduction should be made until the net proceeds of its road for one year had exceeded 15 per cent, of its capital actually paid in; and provided further, that such rates should not be so changed as to produce a profit below 15 per cent, as aforesaid; that, in accordance with the general laws of the States of Arkansas and Missouri, said St. Louis, Arkansas and Texas Railway Company, on the 10th day of February, 1881, was consolidated with two other corporations, in the name ’of the St. Louis, Arkansas and Texas Railway Company, Consolidated, which latter company succeeded to all the property, power, privileges, rights and immunities which belonged to either of the consolidating companies.

That, at the time of the consolidation, the road of the original Arkansas corporation had not been completed, and that it and the consolidated corporation were without means to complete the road.

That, on the 2d day of February, 1882, the consolidated company, by the authority and in pursuance of the general laws of the States of Arkansas and Missouri, sold and conveyed to the appellant all its railroad in said State, together with all its rights, privileges, franchises and immunities thereunto belonging or appertaining, the appellant assuming in consideration thereof all the debts and obligations of the consolidated company; that the appellant thereby succeeded to the rights of the consolidated company, under its contract with the State, to fix such reasonable rates of fares for the transportation of passengers as would enable it to realize a profit of not less than 15 per cent, per annum of its capital actually paid in.

That the road of said consolidated company has been completed for five years, and has never earned during any year profits to exceed 3 per cent, on the capital actually paid in, and that neither of the consolidating roads had earned profits during any year in excess of such rate ; that the net earnings of said consolidated road for the next two years would not exceed 3 per cent, on the capital actually paid in, or on the amount actually expended on the consolidating lines; and that, if appellant is required to charge no more than three cents per mile for the carriage of passengers on said line of railway, its earnings will be so reduced that no profit whatever will inure to its owners, and such earnings will not pay reasonable interest on the fixed indebtedness actually incurred in constructing the road.

That the formation of the original company, its consolidation with others and the sale by the consolidated company, each and all constitute contracts between the State and said several companies, entered into upon the faith that each of said several companies should have the right to fix its rates for the carriage of passengers at any sum it might deem proper which would not produce an annual net profit on the capital actually paid in, to exceed 15 per cent.; that the act in question alters the said several contracts, and is in violation of section 10, article 1, of the Federal constitution.

That, by section 6, article 12, of the constitution of Arkansas, in force at the several dates aforesaid, it is provided that no charter of any corporation shall be altered, revoked, annulled or repealed in such a manner as to do injustice to-the corporators, and that the act is in violation of said provision.

That the line on which the stations named are located, contains heavy grades, many cuts and fills, bridges, trestles, embankments and tunnels, the construction of which cost, and the maintenance of which does and will continue to cost extraordinarily and unusually large sums of money, and that it is reasonable and just to charge five cents per mile for carrying passengers over said line; that to limit its passenger rate to three cents per mile takes its property without compensation, in violation of the fifth and fourteenth amendments to the Federal constitution.

That it is special legislation, and discriminates against the defendant in this, that it permits a company operating seventy-five miles of road or less to charge five cents per mile passenger fare, but prohibits a company operating more than that length of road from charging that amount for a passage not exceeding that distance, in violation of article 2, section 18, of the State constitution, and of section I of the fourteenth amendment to the Federal constitution, stitution.

That the defendant’s road is made up of roads that formerly belonged to different companies, and the stations named are situate on a line which, as formerly owned, was-less than seventy-five miles in length; that therefore the former owner might have charged five cents per mile fare, and. the appellant as its successor acquired the right to make the same charge.

That, before the consolidation of the companies before-named, the St. Louis, Arkansas and Texas Railway Company in Arkansas, for the purpose of constructing its road,, mortgaged its property to secure bonds, which were placed on the market and sold to purchasers, who in good faith relied upon the observance on part of the State of its contract with the company relative to fixing its passenger rates; that said bonds are unpaid, and if the appellant is permitted to charge no more than three cents per mile for carrying passengers, the earnings of the road of the original company will be insufficient to pay the interest on said bonds, and default will be made therein; that the act is therefore unconstitutional.

_5. constitutional law— pasíen^errate^ In the view that we have taken of the law, it will be unnecessafy to go into the discussion of the act, as affected by the provisions of the Federal constitution, relied upon by the appellant. When the St. Louis, Arkansas and Texas Railway Company in Arkansas was organized, the constitution of the State contained the following provisions :

Section 6, article 12. “Corporations maybe formed under general laws, which laws may, from time to time, be altered or repealed. The general assembly shall have the power to alter, revoke or annul any charter of incorporation now existing and revocable at the adoption of this constitution, or anythat may hereafter be created, whenever, in their opinion, it may be injurious to the citizens of this State, in such manner, however, that no injustice shall be done to the corporators.”

Section ii, article 12. “Foreign corporations may be authorized to do business in this State, under such limitations and restrictions as may be prescribed by law. Provided, That no such corporation shall do any business in this State, except while it maintains therein one or more known places of business and an authorized agent or agents in the same upon whom process may be served; and, as to contracts made or business done in this State, they shall be subject to the same regulations, limitations and liabilities as like corporations of this State, and shall exercise no other or greater powers, privileges or franchises than may be exercised by like corporations of this State, nor shall they have power to condemn or appropriate private property.’’

Those provisions have ever since been and now are a part of the fundamental law of the State. They entered into and became a part of the contract between the State and the corporations concerned in this cause. By their terms the State was authorized to alter, revoke, annul or repeal all charters of corporations thereafter created in this State, whenever, in the opinion of the general assembly, such charter is injurious to citizens of the State. The only limitation upon the power is that it shall not be so exercised as to do injustice to the corporators. It is provided that foreign corporations may be admitted to do business in the State upon certain conditions, and that upon compliance therewith they shall conduct their business subject to the same regulations, limitations and liabilities as like corporations of this State, and shall exercise no other or greater powers, privileges or franchises than may be exercised by like corporations of this State.

The appellant purchased its line in this State subject to the provisions just mentioned. Though the statute then in force for the regulation of rates to be charged for the transportation of passengers (Mansf. Dig., sec. 5473) permitted a higher rate to be charged than that allowed by the act in question, the appellant knew that all such acts were subject to legislative change. Thus warned, it elected to come into the State to operate a railroad. It thereby undertook and became bound to do it according to the terms and conditions imposed upon domestic corporations. It bound itself to the State by contract that it woulu conform to such rates of charges as the State might fix, provided they worked no injustice to its corporators. If the act in question violates that provision, the act must fail; otherwise it must stand. To all other objections that may be urged against the act, it is sufficient to reply: Consensus facit jus. We therefore pass without discussion the clauses relied upon in the Federal constitution, and address ourselves to the single inquiry, Do the allegations of the answer disclose that the act is unjust to the incorporators of the appellant?

For the purpose of this case we have not felt called to decide whether the question of the justice or injustice of the act is political and for the sole determination of the general assembly, or judicial and subject to be investigated in the courts. Nor have vve considered how far the determination of that question is controlled by the recent decisions of the Supreme Court of the United States, in what is known as the Minnesota railway cases. Chicago, etc. Ry. Co. v. Minnesota, 134 U. S., 418; Minneapolis Ry. Co. v. Minn., id., 467. We treat it as a question within the cognizance of the court, but reserve a decision thereon until a case is presented which calls for it.

We are of opinion that the answer and argument in its support rest upon erroneous conceptions of the law.

6 consoiiRegulan™ of It appears from the answer that the appellant operates a continuous line of railroad from Fort Smith in this State to the City of St. Louis in Missouri. That the line, as owned and operated when the act in question passed, comprises a road constructed by the appellants and one purchased by it, which latter was made up by consolidating the roads of three different companies. The transportation for which the charges complained of were made was over that part of appellant’s road which was formerly a part of one of the consolidating roads. The answer seeks to test the justice of the act, not by its effect on the net earnings of the entire road of the appellants, but by its effect upon the net earnings of thatportion of its road acquired by purchase, as well as of that part formerly owned by one of the consolidating companies. But that is not the correct test. The appellant cannot claim the right to earn a net profit from every mile, section or other part into which its road might be divided, nor attack as unjust a regulation which fixed a rate at which some such part would be unremunerative. It can only claim a profit from the operation of its entire line, and attack as unjust an act that denies it the right to fix such rates as will yield a profit upon its aggregate business. The-corporations owning the several parts of the road as to-which it is charged that the act operates unjustly were dissolved years before it was passed. As to them it could not operate unjustly, and in their behalf no cause of'complaint can exist. The lines, though once independent, are now parts of a whole, and any division of it into its original parts for the purposes of the act in question is arbitrary. There is as much reason to divide the line according to sections or stations, or into divisions of a designated mileage, and demand the right to charge for service upon each part a rate sufficient to make the operation of that part alone, independently of other parts, remunerative. If an act were to be thus tested, it would be necessary in each case to ascertain what part of the line was included in the trip, and then determine what charge was necessary to make the business of that part profitable. That would involve the ascertainment of what expense was incurred in operating the particular division alone; but as there are other general expenses, not incurred in operating any other division more than the one in question, it would be necessary to compute them and apportion a just part to the designated division. It would then be necessary to ascertain what the road could earn at the rate fixed from receipts arising exclusively from the business of the particular part, and its pro rata of receipts from business done in part over it and in part over other divisions. It could then be seen whether the expense of operating the particular division exceeds the receipts under the rate proposed. In what proportion the several parts should share with others in the expenses and receipts in which they participated it would be difficult to determine. In fact the problem proposed would be difficult, if it did not baffle solution. If upon the examination it was ascertained that division A could earn a profit at a rate of three' cents per mile for passengers, as to it the act would be valid; but if it was ascertained that division B would sustain a loss unless permitted to charge five cents per mile, the act as to it would be invalid. If it could be conceived that, with such an issue to be submitted to a jury, a decision would ever be reached in two different causes, a remarkable result might be anticipated. It would then be judicially determined that a law fixing three cents as the maximum would be constitutional as regulating rates from Fayetteville to the next station south, but unconstitutional as regulating the rates from Fayetteville to the next station north. Such a condition would be rendered improbable, only because it is exceedingly improbable that two cases would be prosecuted to a termination in the life of any one person.

7. Classification of railroads —Effect of act up o n members of a cla>s. We think it must be evident that, to the extent that the question of injustice is to be determined by the effect of the act upon the earnings of the appellant, the earnings of its entire line must be estimated as against all its legitimate expenses, under the operation of the act. But we think that a more enlarged scope should be given the inquiry, to decide the question properly; and the justice of the act should be determined by its effect upon classes, and not by its effect upon single members of classes. The parent company was organized and the appellant began its business in this State after the adoption of a policy by the State with reference to corporations that marked a change in that regard. It had been usual to create corporations, grant privileges and limit powers by special act of the legislature ; it was then provided by the constitution that no special act of incorporation should be passed, and that all corporations should be formed under general laws. In pursuance of the changed policy, the act was passed providing for the organization of railway companies. As the powers of corporations were conferred and defined by general laws, so the State indicated its policy to regulate their enjoyment and exercise by laws likewise general. The provision relied upon by the appellant, from the act of July 23, 1868 (Mansf. Dig., sec. S473), authorizing railway companies to regulate passenger fares, was general in its terms and applied to all railroads in the State. The act in question, though it classifies roads for the purpose of regulation, is general; for it prescribes the same regulations as applicable to each member of a class. It would therefore be unreasonable to test the rate fixed for any class by its effect upon a single member of the class. One member might be so situated that at a given rate of fares its earnings would be large; while another member, at the same rate but affected by ■different conditions, perhaps'temporary, such as destructive competition, wasteful management, or limited business, could not earn expenses. Neither of said members, the one ■enjoying favorable circumstances nor the one suffering from unfavorable circumstances, would furnish the proper criterion by which to judge the rate proposed; whether it would be just or unjust, should be determined by its effects upon those operating under usual and ordinary conditions. The appellant nowhere alleges that the rate fixed by the act in question is unjust as applied to other roads in its class, or that it cannot be adopted by them without any unjust impairment of their earnings. We think it follows, if roads may be classified for regulation, that the justice or injustice of the regulation must be determined with reference to its effect on the class and not a particular member of it. Any other rule would lead to confusion—almost chaos—in the law. An act held valid as to one member of a class might be held invalid as to another, and no adjudication would remove or lessen the uncertainties as to the validity of an act. We do not mean to imply that the act under the construction given it is free from the objection that the question of its legality is undetermined after the adjudication of any one ■case. If the question of constitutionality is to be determined by a judicial inquiry into the reasonableness of the limit prescribed, it is obvious that the result in each case would depend upon the facts developed in it and the conclusions drawn therefrom, thus varying as the facts in proof varied, and as different trial tribunals might differ in viewing them. It would be better for all concerned, the public and the corporations, if the law provided some means for testing the reasonableness of the rates prescribed, before they were to become operative, in a proceeding in which the corpora-*tions contesting it and the public, through its representatives, would have an opportunity to be heard.- The final determination in such a proceeding should be conclusive as to that fact, and determine the legal status of the act; and if it were sustained, a defense of its unreasonableness should not be entertained in an action like this. The plaintiff in an action of this character has not the facilities or interest to present the matter as it should be in a controversy so wide in its scope, affected by circumstances so universal and complex. The burden of the litigation is too great for the-return. While we think the law should be as we have indicated, we cannot conclude that it is; although a somewhat similar principle was contended for by the late Justice Miller, in a separate opinion in the Minnesota cases.

It was ruled in Dow v. Beidelman, 49 Ark., supra, that the classification of roads for regulation of rates was proper,.

Affirm.