Houston & T.C.R. Co. v. Storey

• Citation: 149 F. 499
• Court: U.S. District Court — Western District of Texas
• Decision Date: 03 December 1906
• Parties: HOUSTON & T.C.R. CO. et al. v. STOREY et al.

149 F. 499

HOUSTON & T.C.R. CO. et al. v. STOREY et al.

United States Circuit Court, W.D. Texas, Austin Division.

December 3, 1906

Baker Botts, Parker & Garwood, for Houston & T.C.R. Co., Houston East & W.T. Ry. Co., Galveston, H. & S.A. Ry. Co., and Texas & N.O.R. Co.

Terry Cavin & Mills, for Gulf, C. & S.F. Ry. Co.

N.A Stedman, for International & G.N.R. Co.

E. B. Perkins, for St. Louis Southwestern Ry. Co. of Texas.

T. S. Miller and Fiset & McClendon, for Missouri, K. & T. Ry. Co. of Texas.

Thomas J. Freeman and W. L. Hall, for Texas & P Ry. Co.

Newton N. Lassiter, for Chicago, R.I. & G. Ry. Co.

Spoontz, Thompson & Barwise, for Ft. Worth & D.C. Ry. Co.

C. H. Yoakum, for Louis, S.F. & G. Ry. Co. and Ft. Worth & D. Ry. Co.

Houston Bros., for San Antonio & A.P. Ry. Co.

R.V. Davidson, Atty. Gen. of Texas, and S. H. Cowan and R. J. Channell, for defendants.

MAXEY District Judge.

Separate bills have been filed by the following named railroads to enjoin the schedule of rates prescribed by the railroad commission, to wit: Houston & Texas Central Railroad Company; Gulf, Colorado & Santa Fe Railway Company; International & Great Northern Railroad Company; St. Louis Southwestern Railway Company of Texas; Missouri, Kansas & Texas Railway Company of Texas; Texas & Pacific Railway Company; Houston, East & West Texas Railway Company; Galveston, Harrisburg & San Antonio Railway Company; Texas & New Orleans Railroad Company; Chicago, Rock Island & Gulf Railway Company; Ft. Worth & Denver City Railway Company; St. Louis, San Francisco & Texas Railway Company; Ft. Worth & Rio Grande Railway Company; San Antonio & Aransas Pass Railway Company. Demurrers are interposed by the defendants to all the bills; but, without making specific rulings in each case, it is thought that the disposition of the demurrers in the suit of the Houston & Texas Central Railroad Company and the views of the court hereinafter expressed as to special matters arising in other suits will enable counsel to prepare the proper orders in each case.

It is an elementary principle of pleading that facts well pleaded in a bill of complaint are admitted by demurrer to be true, and the determination of the truth or falsity of facts alleged must await the judgment of the court when the proofs are considered upon the final hearing of the cause. The bills filed by the various companies present questions of great importance to the plaintiffs and to the people, and it is conceived to be the duty of the court, in ruling upon demurrers to such bills, particularly special demurrers, to give to the allegations a liberal construction, to the end that the court may, upon consideration of all the proof submitted by the parties to the cause, intelligently decide whether the rates prescribed by the railroad commission are reasonable and just to the carriers and to the public. Along these lines it was said by the Supreme Court, in Covington, etc., Turnpike Co. v. Sandford, 164 U.S. 597, 17 Sup.Ct. 205, 41 L.Ed. 560:

'In short, each case must depend upon its special facts; and when a court, without assuming itself to prescribe rates, is required to determine whether the rates prescribed by the Legislature for a corporation controlling a public highway are, as an entirety, so unjust as to destroy the value of its property for all the purposes for which it was acquired, its duty is to take into consideration the interests both of the public and of the owner of the property, together with all other circumstances that are fairly to be considered in determining whether the Legislature has, under the guise of regulating rates, exceeded its constitutional authority, and practically deprived the owner of property without due process of law. What those other circumstances may be it is not necessary now to decide. That can be best done after the parties have made their proofs.'

With these general observations the court will proceed to rule upon the demurrers in the order as they appear.

General Demurrer.

The court is of the opinion that, taken as a whole, the bill states a cause of action, and the general demurrer is therefore overruled. See Reagan v. Farmers' Loan & Trust Company, 154 U.S. 362, 14 Sup.Ct. 1047, 38 L.Ed. 1014.

Special Demurrers.

1. The first special demurrer goes to paragraph 3 of the bill, which alleges that the act of the Legislature of Texas creating the railroad commission is unconstitutional and void.

That the act of the Legislature, generally speaking, is a valid exercise of legislative power, there can be no doubt, since the same has been held to be constitutional by the Supreme Court of the United States. The demurrer is therefore sustained. Reagan Case, supra.

2. The second demurrer challenges the allegations of the bill, as contained in paragraph 3, that the rates, tariffs, classifications, schedules, etc., are void.

The question here attempted to be raised will be determined upon the final hearing. Hence the demurrer will be overruled.

3. The third demurrer objects to the allegations of paragraph 4 of the bill that the plaintiff is a carrier of interstate passengers and freight, etc., and that its duty in respect to such interstate traffic is voluntary.

The allegations of paragraph 4 may become material in determining the proper basis for rate prescription. The demurrer is overruled.

4. The fourth demurrer refers to paragraph 5 of the bill, and objects, in effect, that the value of stocks and bonds constitute no sufficient legal or authoritative basis or ground from which the court can determine the reasonableness or confiscatory character of the rates.

Every pertinent fact or circumstance which would have a tendency to enable the court to arrive at the fair value of the plaintiff's property should be considered in determining the reasonableness of the rates prescribed by the railroad commission. Thus it was said by the Supreme Court, in Smyth v. Ames, 169 U.S. 466, 467, 18 Sup.Ct. 418, 42 L.Ed. 819:

'We hold, however, that the basis of all calculations as to the reasonableness of rates to be charged by a corporation maintaining a highway under legislative sanction must be the fair value of the property being used by it for the convenience of the public. And, in order to ascertain that value, the original cost of construction, the amount expended in permanent improvements, the amount and market value of its bonds and stock, the present as compared with the original cost of construction, the probable earning capacity of the property under particular rates prescribed by statute, and the sum required to meet operating expenses, are all matters for consideration, and are to be given such weight as may be just and right in each case. We do not say that there may not be other matters to be regarded in estimating the value of the property. What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. On the other hand, what the public is entitled to demand is that no more be exacted from it for the use of a public highway than the services rendered by it are reasonably worth. ' San Diego, etc., Co. v. National City, 174 U.S. 739, 19 Sup.Ct. 804, 43 L.Ed. 1154.

In view of the ruling of the Supreme Court, the allegations are pertinent, and proof of the facts would be clearly admissible. The demurrer is overruled.

5. The fifth demurrer objects to so much of paragraphs 7 and 8 of the bill as set forth that certain decrees, alleged to have been entered by the Supreme Court of the United States, are res adjudicata, etc.

The contention of the defendants in this respect is correct; and, so far as the plaintiff attempts to plead the decrees mentioned as res adjudicata, the demurrer is sustained.

6. The sixth and seventh demurrers go to so much of paragraphs 9 and 10 of the bill as allege the compromise of certain suits and the establishment by such compromise of certain rules and regulations contained in circular 766 of the railroad commission.

Conceding the truth of the allegations, the railroad commission would not be estopped thereby from prescribing future reasonable and just rates; nor do the allegations show that the plaintiff acquiesced in the rates prescribed by circular 766. To the extent, therefore, that the plaintiff relies upon the allegations as an estoppel, the demurrer will be sustained. The allegations, however, may remain as part of the bill, as they may become important in considering other questions, particularly the supreme issue submitted, to wit, the reasonableness of the rates prescribed by the commission.

7. The eighth demurrer objects to so much of paragraphs 10 and 19 of the bill as complain of certain circulars, orders, rates, schedules, and tariffs issued by the railroad commission and described in Exhibit E.

The ground of this objection is that the plaintiff has, by its long-continued acquiescence in and observance of the regulations, confirmed their reasonableness and agreed to their enforcement. This demurrer is overruled, because the allegations of the bill show that the plaintiff has persistently and continuously protested against the rates referred to.

8. The ninth demurrer challenges the right of the plaintiff, as claimed in paragraph 10 of the bill, to earn an amount sufficient to provide a sinking fund for the discharge of its indebtedness, in addition to paying the interest thereon.

This claim of the plaintiff was doubtless based upon the decision of the Supreme Court of Pennsylvania. See Brymer v. Butler Water Co., 179 Pa. 251, 36 A. 249, 36 L.R.A. 260. With due respect for the opinion of that high tribunal, this court is unable to concur in the view expressed by it, and therefore sustains the demurrer.

9. The...