State ex inf. Attorney-General v. Terminal Railroad

81 S.W. 395, 182 Mo. 284, 1904 Mo. LEXIS 178

• Court: Supreme Court of Missouri
• Decided: June 2, 1904
• Status: Published

Opinions

VALLIANT, J.

This is a proceeding on information of the Attorney-General, the object of which is to exclude the respondent corporation from all corporate franchises, and to annul its charter, on the ground that it has violated the law of this State which prohibits a railroad company from consolidating with another company which owns or controls a parallel or competing line.

The information sets out in chronological order the several corporations that have been chartered to handle the terminal railroad business in St. Louis. Prom its statements the following facts may be gathered:

In 1874 the structure now known as the Eads bridge across the Mississippi was finished. The railroad tracks over that bridge, extending from the east to the west, entered a tunnel under Washington avenue in St. Louis, which ran west and southwest until it emerged at a point near Eighth and Poplar streets. In that year a Union Depot Company was chartered, which erected a union depot and passenger station with switch tracks, yards, etc., at a point near Twelfth and Poplar streets. From that date on there were various companies chartered under the general railroad law whose object was to construct, maintain and use railroad tracks for the purpose of handling cars and trains of the various railroad companies coming into and out of the union depot from the south and the west, and also from the east over the Eads bridge. Through these corporations, rights-of-way were acquired, tracks and switch yards necessary for this business were constructed, connected with the tracks of the Union Depot Company extending from Compton avenue on the west to the properties of the Union Depot Company, thence east and through the tunnel and across the Eads bridge, by means of which trains of all railroads coming from the several directions above indicated were received by the agencies of the terminal company at the various termini of the railroads, and drawn into the premises of the union depot, and in like manner trains departing from the city were taken charge of at the union depot by the terminal company and drawn over its tracks and delivered to the railroad companies at their respective termini, and there were also constructed switch tracks and spurs reaching to private business establishments located in the vicinity, or along the general course, of the terminal tracks. The union depot and passenger station, and all its equipments, were subsequently moved farther west, and now occupy blocks between Eighteenth and Twenty-first streets.

In 1889 the several corporations owning the terminal rights and properties above mentioned consolidated and took the name of the “Terminal Railroad Association of St. Louis,” the original authorized capital stock of which was $7,000,000, which in 1893 was increased to $12,000,000 and in 1903 to $50,000,000. That consolidated corporation was organized under the general railroad law of this State. It is the respondent in this suit. The respondent thus became the owner of all the rights and properties above mentioned, including those of the Union Depot Company, all of which, in the language of the information, “constituted the larger part of the terminal, switching and car storage facilities subject to use by persons and corporations engaged in business in St. Louis and used by them in transferring and switching the products so dealt in or manufactured by them to and from the railroad tracks and lines of railroad companies running into, through and from said city and to and from the various factories, manufacturing establishments, freight depots, warehouses, private tracks and switches and other places in said city from the factories, storage warehouses, depots, railroad tracks and switches in said city to the place of distribution or delivery depot in said city, and in switching and conveying the freight and passenger cars from and to the switches, side tracks, depots, warehouses and termini of the various railroads running into said city. ’ ’ This condition continued until August 17, 1893, when the respondent, by agreement of that date with the St. Louis Merchants Bridge Terminal Railway Company, acquired control and practical ownership of the properties of that company. It is that agreement that forms the chief ground of the charge in the information that the respondent has violated the law.

The structure known as the Merchants Bridge is a railroad bridge spanning the Mississippi about two miles north of the Eads bridge, its west end being at Ferry street in St. Louis. The St. Louis Merchants Bridge Terminal Eailway Company, which we will hereinafter call the Merchants Terminal, was incorporated under the general railroad law of this State in 1887. The object declared in its articles of association was to construct and maintain a standard gauge railroad within the limits of the city from the union depot to the northern city limits; and from a point where it crosses North Market southwardly to Carr Street; and from Ferry street eastwardly across the Merchants Bridge into the State of Illinois; also from the point where it crosses Pope avenue northwardly to the intersection of Morin and Florissant avenues — in all fifteen miles.

In 1892 the Merchants Terminal Company acquired from another corporation called the St. Louis Terminal Eailway Company a line of railroad which was to be constructed from a point near the northern limits of the city running north and westward and .then southwestward, belting the city to Arloe station in St. Louis county, which is a station on the St. Louis & San Francisco railroad. The design of this road was, when it should be completed, to furnish all persons and corporations in the city who might have use therefor “railroad connections, tracks, switches, freight cars, terminal and railroad terminal facilities including depots, warehouses, car storage therein, switching facilities, and railroad track and terminal connections with the various railroads running into the city. ’ ’ and in this respect the design was to compete with the respondent in doing that business.

On August 17, 1893, the respondent entered into an agreement, the particulars of which are set out in the information and a copy filed as an exhibit, the result of which was to give the respondent the practical ownership and control of the properties of the Merchants Terminal Company and, with the other properties held by respondent, to give to respondent control of all instrumentalities now in operation in the city designed for handling the terminal business of the railroads centering in St. Louis.

The conclusion drawn by the Attorney-General from those facts is that the respondent, the Terminal Railroad Association of St. Louis, has violated the law as ordained in section 17 of article 12 of the Constitution of this State, and as declared in section 1062, Revised Statutes 1899.

The respondent demurs to the information, assigning as grounds therefor that the information does not show:

1. That respondent’s road and that of the Merchants Terminal are parallel or competing lines.

2. That they are railroads within the meaning of section 17, article 12, of the Constitution, or of section 1062, Revised Statutes.

3. It does show that the properties of the respondent are such as it was authorized to acquire and use by the provisions of sections 1164-1165, and the amendments thereof by the act of the General Assembly of 1903.

I. The clause in the Constitution which it is contended has been violated is found in section 17, article 12, which section is as follows:

“No railroad or other corporation, or the lessees, purchasers or managers of any railroad corporation, shall consolidate the stock, property or franchises of such corporation with, or lease or purchase the works or franchises of, or in any way control, any railroad corporation owning or having under its control a parallel or competing line; nor shall any officer of such railroad corporation act as an officer of any other railroad corporation owning or having the control of a parallel or competing line. The question whether railroads are parallel or competing lines shall, when demanded, he decided by a jury, as in other civil issues.”

In 1875, when the convention which framed our Constitution was in session, there were already lines of railroads running through the State which were parallel and competing, not parallel in a strictly geometrical sense and not competing at all points, but parallel as that word had come to-be used in a commercial sense as applied to railroads, and competing between principal termini for the business of carrying freight and passengers between those points. And it required then but little foresight to discern that other lines of railroads, in a like sense parallel and susceptible of being used in a like sense in competition, would be constructed crossing or traversing the State in all .directions. The history of those times tells us that the people were already awakened to the advantage that competing roads would afford them and to the necessity of preserving that advantage. It was in view of the condition then existing and conditions then to be reasonably anticipated that the clause in the Constitution above quoted was adopted. Courts should not lose sight of those conditions when construing that clause. In the language of the Attorney-General it “must be construed in the light of its practical, popular and general sense, with the view of protecting the public against adversities and injuries which would naturally follow in the absence of this inhibition.” And we make free to quote from the Attorney-General’again when he says: ‘ ‘ The spirit and object of the constitutional inhibition must be regarded; it will not do to juggle with its technical meaning. ’ ’

Going back to the date when the Constitutional Convention was in session and viewing the physical and commercial conditions as they were at that date we must conclude either that a system of terminal railroad appliances, such as the information shows has, since then, been evolved in St. Louis, had not then been conceived by the members of the Convention, or else that they did not understand that they were affecting that class of public utilities when they adopted the clause now under consideration. Because, if they had such traffic appurtenances in mind and if they intended to include them in the inhibition, they would have used words more apt to express such intention. The words as used are sufficient to forbid a consolidation of railroad companies whose lines are parallel or competing in the sense above-mentioned, tracking the State through its length or its breadth; they need no other words of explanation to give them that effect, and that is the effect that we would naturally conclude the framers of the Constitution intended them to have.

We have a right to presume that a system of terminal railway appliances as a public utility was not altogether unknown to the members of the • Constitutional Convention, though such a system was then in an undeveloped stage of existence, because, as early as 1871, the General Assembly had passed an act looking to the formation of such a system and, as the information shows, such a system was, in 1875, in a formative state in St. Louis. The act of 1871, amended from time to time as to the General Assembly seemed necessary to meet the -wonderful growth of the city and its railroad traffic, has been preserved in our statutes, and is now embodied in sections 1164, 1165, Revised Statutes 1899, and Laws 1903, p. 130. The act of 1871 (Laws 1871, p. 59) starts out with a declaration of the advantage to be attained and the disadvantages to be overcome by its enactment: “In order to facilitate the public convenience and safety in the transmission of goods and passengers in large cities from one railroad to another, and to prevent the unnecessary expense, inconvenience and loss attending the accumulation of a number of stations, ’ ’ corporations to do the kind of traffic that the respondent is now engaged in.doing were authorized to be formed.' Thus when the Convention was in session there were in the State corporations engaged in carrying over their railroads freight and passengers from one city to another, and other corporations engaged in transferring the cars brought by a railroad to its terminus in a city to some other point in the same city or to a common terminus of all railroad traffic in that city. The characters of the business of the two kinds of corporations were essentially different, though both related to railroad traffic. The one was railroad business in its ordinary meaning, the other railroad business of a special character. A law might naturally be designed with reference to the one without being intended to affect the other. The statute expressly authorizes the formation of a corporation to handle the traffic of all railroads approaching the city and, to that end, to use a common track, to that extent therefore merging all the railroads in one; and it also authorizes the railroad companies to make such a combination among themselves. There is to be found in the act of 1871 and its amendments express authority for railroad companies parallel and competing or otherwise to unite or, if the term is preferred, consolidate, after they reach the city, so as to throw all their terminal business under a joint management. Thus at the time the Constitutional Convention was in session there was a law expressly permitting railroad companies to consolidate their properties and interests to this extent, and there was in fact, according to the averments in the information, such a consolidation of interests, by railroad companies, in operation in this city; therefore, before we can say that the framers of the Constitution intended this section to apply to corporations engaged in strictly terminal business, or to railroad companies, uniting in a common terminal system, we must say that they intended to forbid the formation of such a union terminal system as the statute had expressly authorized.

The history of the railroad terminal business as disclosed in the information and the acts of the General Assembly affecting the same, show that neither the men engaged in the business nor the members of the General Assembly from first to last have ever put such an interpretation on the Constitution.

The main purpose in the minds of the members of the convention in adopting this section was to preserve to the people who might have a choice of railroads between two points, the advantage in rates that would accrue to them from competition between rival companies. We must not lose sight of that purpose in our consideration of this subject.

The purpose of the statute of 1871 and its amendments as proclaimed in its preamble and as shown by its provisions, is to obviate the necessity of every railroad having its own passenger station, freight depot and switch yard, involving the expense and inconvenience of moving passengers by means of omnibuses, and other such vehicles, to other stations in the city, and the unloading and hauling of freight from the terminus of one road to that of' another or to the consignee’s place of business in the city or from' the manufactory to the railroad terminus, all-of which as appears in the now almost forgotten history of railroad traffic in the past, was accomplished at the great inconvenience and expense of the passenger and the shipper.

The’purpose of the General Assembly was to allow such combination among the managers of the railroads entering the city as to reduce to the minimum the number of tracks, bring all the trains to one terminus, all freight to a common point for distribution, all cars to a common yard. It expressly authorized two or more railroad companies to do this and it put no limit to the number that might so combine.

The railroad companies in this State have for thirty years past been acting oh the theory that they had the right to do that and so they have unless we can say that the framers of the Constitution intended to forbid them doing so.

The purpose of the statute is not only not in conflict with -the purposes of the Constitution but is in aid of it. "We have between onr two greatest cities, St. Lonis and Kansas City, four or five railroads which in the sense above mentioned are parallel and competing lines for the traffic between those two cities. Suppose a manufacturing concern in the northern part of the city has a switch track to its establishment connecting it with the Merchants Terminal tracks and desires to make shipments of its products to Kansas City, the business of the eoncernbeingof such magnitude as to make its patr onage an object of rivalry between all the railroad companies reaching that market. But if the Merchants Terminal Company can deliver the cars- which are loaded on the switch at the manufacturer’s establishment to one railroad only that railroad has a practical monopoly of the business of that manufacturer. But if the whole terminal system is open to the shipper he may invite bids on his freight and employ the railroad that will take it •at the lowest rate. That is the system that this respondent has established, and it is bound to serve all railroad companies approaching St. Louis on the same terms; in the language of the information “the general object and purpose being to provide the most ample and convenient connections, accommodations and terminal facilities in St. Louis for all railroads now entering, or hereafter to enter the same, and all individuals and companies doing business with said railroads.” The State has ample power to hold the respondent to a faithful performance of that public duty, to prevent favoritism and to prevent' extortion.

We gather from the information that all along the lines of the terminal tracks, intersecting the city from' north to south, from east to west, and belting it on the west, there are manufacturing and other business concerns with switch tracks or spurs into their premises, which enable the shipper to load the cars on the switch tracks on his premises and have them delivered to any railroad that reaches the city. A more effectual means of keeping competition up to the highest point between parallel or competing lines could not be devised. The destruction of the system would result in compelling the shipper to employ the railroad with which he has switch connection, or else cart his product -to a distant part of' the city, at a cost possibly as great as the railroad tariff.

St. Louis is a city of great magnitude in the extent of its area, its population, and its manufacturing and other business. A very large number of trunk line railroads converge in this city. In the brief of one of the well-informed counsel in this case it is said that St. Louis is one of the largest railroad centers in the world. Suppose it were required of every railroad company to effect its entrance to the city as best it could and establish its own terminal facilities, we would have a large number of passenger stations, freight depots and switch yards scattered all over the vast area and innumerable vehicles employed in hauling passengers and freight to and from those stations and depots. Or suppose it became necessary in the exigency of commerce that all incoming trains should reach a common focus, but every railroad company provide its own track; then not only would the expense of obtaining the necessary rights of way be so enormous as to amount to the exclusion of all but a few of the strongest roads, but, if it could be accomplished, the city would be cut to pieces with the many lines- of railroad intersecting it in every direction, and thus the greatest agency of commerce would become the greatest burden.

This is what our General Assembly as early as 1871 to some extent at least foresaw and attempted to relieve against, and we can not believe that the Constitutional Convention in 1875 was less appreciative of the conditions then present or in prospect, and hence we can not believe that the Convention, when it said that two lines of railroads that were parallel or competing should not be brought under one ownership or management, meant that two lines, used exclusively for bringing the trains from the several railroad termini in the city or at the city’s border to a common terminus, should not be so consolidated; because, as we have seen, the consolidation of the terminal facilities promotes the competition that this clause in the Constitution was designed to preserve.

What we have above said is intended to apply to the respondent only in reference to the charge in the information that it has violated the clause, of the Constitution forbidding’ the consolidation of railroad companies whose lines are parallel or competing. We hold that that constitutional inhibition was not intended to apply to companies owning lines of railroads used alone in terminal business.

II. The information charges that the roads owned by the respondent in 1893 and those owned by the Merchants Terminal Company were parallel or competing lines. That is the statement of a conclusion which depends for its correctness on the facts from which it is drawn. The words in the Constitution descriptive of the lines are “parallel or competing.” The conjunction “or” is there used to co-ordinate the two words which it connects, as equivalent, the one of the other. The lawmakers were concerned, not so much with the figure the lines of the roads would make when traced on the map, as they were with the commercial relation the lines bore to each other; the desideratum was to preserve the competition.

The two railroad bridges crossing the river are parallel; whether they could have been used in 1893 by their respective owners in competition with each other, depends on the facilities that each had for receiving and delivering trains from the various railroads approaching St. Louis from the east aimed for the union station or trains departing from the union station destined to the east.

The information gives us to understand that the respondent company was, already in 1893, before it acquired the right to use the Merchants Terminal tracks, equipped to do that business, and it specifies the lines of railroad and appurtenances that constituted that equipment, hut it does not show that the Merchants Terminal Company was equipped to do a like business. In that important particular this case differs from Railroad v. Jarvis, 15 Am. and Eng. R. R. Cases (N. S.) 459, to which we are referred. In that case there were two belt lines which crossed and tapped all the railroads north of Cahokia Creek terminating in East St. Louis, and the two companies were in fact actively engaged in competing with each other for the same business. The court said’: “It appears that in 1884 these two companies were cutting rates, buying business, and losing money, and upon the advice of a mutual friend the two companies concluded to put the two properties under the same management and as a result the leases in question were made.” No such condition is shown in the case at bar.

In paragraph 26 of the information the lines of road owned and operated by the respondent at the date of the organization of the Merchants Terminal and thence down to the date of the agreement of consolidation complained of, are given, but in the next paragraph when the lines of the Merchants Terminal are given the present tense only is used. These lines are described as commencing at the Merchants Bridge, thence going southwardly, crossing certain streets and blocks described by name and number until it crosses block 419 and Eighth street; the description of the course then given is in these indefinite words, “thence westerly to the present union station.” Whether the Merchants Terminal Company before the contract complained of had independent connection with the union station, or whether trains coming over the Merchants Bridge could have been delivered in the premises of the union station, or trains destined for the east could have been taken thence over the route of the Merchants Terminal independent of the appliances of the respondent, the information does not say. It says the Merchants Terminal Company had a perpetual lease of the Merchants Bridge, hut what connections it had on the east bank of the river or what facilities it had for receiving and delivering trains on that side it does not say. It does not say that before or at the time of the contract assailed the Merchants Terminal was in actual competition with the respondent in the handling of trains, or that it had the means or equipment to compete with respondent for the business. The fact that connection is now made between the Merchants Terminal tracks and those of the union station do not justify the inference that such connections existed before the Merchants Terminal passed under the control of the respondent.

The Merchants Terminal could not have been a competing line unless it had, such connection, and it could mot have become a competing line unless it had the right and power of acquiring such connection. The essential facts to constitute the Merchants Terminal a competing line with that of the respondent are not stated in the information, at most they are left to inference, but since the information is aimed at the life of the respondent it must be construed contra proferentem.

The facts stated in the information do not justify the conclusion therein drawn that the Merchants Terminal was at the time of the consolidation complained of a competing line with the lines of the respondent.

III. It is argued that the contract of August 17, 1893, whereby the consolidation was effected, was ultra vires and that it was against public policy. This assails the validity of the act of consolidation on grounds independent of the constitutional provision above discussed.

The Attorney-General in his brief says: “And it has been time and again held that contracts made by and between quasi-public corporations, whereby the corporate powers and duties of the one are delegated to the other, and where an attempt is made to'alien either absolutely or conditionally the franchises essential to the performanee of its public duties, are ultra vires and absolutely void.” And authorities are cited in the brief which support the proposition.

Of course a statute can not authorize the doing of an act which the Constitution forbids. Since, however, we have concluded that the consolidation complained of is not within the range of the constitutional inhibition we may now consider it in the light of the statute.

There is no controversy in this suit between individuals and the corporation; it is the State through its law officer that is here calling the corporation to the bar and demanding judgment of extinguishment of its corporate life on the ground that it has committed an act beyond its corporate power, and an act contrary to public policy.

It might be conceded without affecting the result, that in 1893 the respondent had not the corporate power to purchase the stock of the Merchants Terminal Company, but its act in that respect, even if ultra vires, was not for that reason necessarily against public policy. The effect of it was, according to the information, to put all the terminal railroad business under one management, but in so far as that concerned public policy it was in line with the policy declared in the preamble to the act of 1871 and repeated in every revision since that date. In 1903 sections 1164 and 1165 were amended expressly conferring on such terminal railroad companies the corporate power to acquire and hold the stock of other such companies. [Laws 1903, p. 130.]

The General Assembly is the source of corporate power and it is also the authority to declare the public policy of the State. Until the General Assembly has spoken on the subject, it is the province of the courts to judge whether or not a given act is contrary to public policy in the light of the common law, but after the lawmaking power has declared the public policy, the courts must enforce the policy as so declared.

If it be conceded that in 1893 the acquisition by the respondent of the stock of the Merchants Terminal was against public policy, it is not so now because in 1903 the General Assembly expressly authorized it.

"What right, therefore, has the State now to demand the annulment of the respondent’s charter on the ground that it has done an act which it had no corporate power to do and which was then contrary to the public policy, when the State itself has since the act was done conferred on the respondent the right to do it and dedared that it is in the interest of the public? In so far as it appears from the information, the State alone is interested in this matter, and since the State, before this information was filed, had expressly authorized the doing of the act in question, the court would not be justified in condemning the act as unlawful or against public policy.

The second count in the information relates to the acquiring by respondent of the property of the St. Louis Transfer Railway Company. What has already been said in reference to the first count applies with equal effect to this count.

The demurrer is sustained and ouster denied.

Brace, Burgess and Fox, JJ., concur; Robinson, G. J., Gantt and Marshall, JJ., dissent.