Southern Ry. Co. v. McNeill

• Decision Date: 25 August 1907
• Citation: 155 F. 756
• Parties: SOUTHERN RY. CO. v. McNEILL et al.
• Court: U.S. Court of Appeals — Fourth Circuit

155 F. 756

SOUTHERN RY. CO. v. McNEILL et al.

United States Circuit Court, E.D. North Carolina.

August 25, 1907

Attorney General 7 [Copyrighted Material Omitted]

Alfred P. Thom, Walker D. Hines, W. B. Rodman and Alex. P. Humphrey for complainant.

Jas. E Shepherd, Fred A. Woodward, Victor S. Bryant and Walter E. Daniels, for defendants.

PRITCHARD Circuit Judge.

The bill alleges that the complainant is a corporation originally created under the laws of Virginia. Under its charter, and under authority from other states, it is authorized to own, lease, control, and operate railroads not only in Virginia, but in other states of the Union; that under this power it has acquired and is operating a continuous line of railroad over 6,000 miles in length, extending through the states of Virginia, North Carolina, South Carolina, Georgia, Alabama, Mississippi, and Tennessee, and by trackage rights this system is connected with another system owned by complainant and lying in the state of Kentucky, Indiana, and Illinois. The complainant as a common carrier of freight and passengers is and has been since its organization engaged in both intra and interstate commerce over its line of road. The defendants admit the authority of the complainant to own and operate roads in North Carolina, but deny that the state of North Carolina has surrendered or given up its right to supervise, regulate, and control the complainant's line of railroad in North Carolina, and specially claims that the state has the power to fix and prescribe rates, both freight and passenger, and has the power to make rules and regulations governing the amount of freight, the furnishing of cars, and the power to prescribe penalties for any violation thereof, controlled only by the fourteenth amendment of the Constitution of the United States.

The General Assembly of North Carolina at its session of 1907 passed two laws regulating rates, the subject-matter of this controversy: (1) The passenger rate act (Pub. Laws 1907, p. 250, c. 216), which provides (section 1) for maximum passenger rate of 2 1/4 cents per mile, except as to children 12 years of age or under, and as to these half price; and provides that the Corporation Commission may exempt all independently owned and operated lines of less than 60 miles in length, and certain newly constructed lines; (section 2) that wherever a road is owned, controlled, or operated, by lease or any other agreement, by any other road, the rate for the road so owned shall be determined by the rate prescribed by the act for the road owning or operating the other. The Corporation Commission is required to publish the rates prescribed by the act prior to June 1, 1907. Section 3 requires interchangeable books to be kept on sale at such stations as the Corporation Commission may designate, and requires railroads to honor mileage books issued by other roads. Section 4 provides a penalty of $500 against any railroad company violating any of the provisions of the act, and, makes a servant of the company guilty of a misdemeanor. The freight rate act (Pub. Laws 1907, p. 252, c. 217) provides (section 1) that the Corporation Commission shall not, in fixing the maximum freight rates, permit common carriers to receive a greater toll for shipment over connecting lines than the sum of the present locals, less 25 per centum, and provides that, when the freight rates on any road is not so high as the present tariff, the Commission may permit the same to be increased to the present standard. The Commission is authorized to reduce any tariff of rates when, in their opinion, such reduction shall be just, but has no power to increase any tariff of rates either by classification or otherwise. Section 2 provides penalties for rebating or discrimination. Section 3: If any shipper shall make a written application for a car or cars for use in shipment of freight, if the railroad company shall fail to furnish the said cars within four days the company shall be penalized in the sum of $5 per day, until the said cars are furnished. Section 4 provides certain penalties for failure to transport freight within a reasonable time. Section 5 directs the Corporation Commission to prepare and publish the tariff of rates, charges, and tolls authorized to be charged and collected under this act.

The complainant alleges that at the same session of the General Assembly there was passed certain other laws regulating the business of complainant, and that the effect of said laws would be to greatly increase the cost of conducting its business, and make the charge more burdensome than heretofore. Said acts are referred to by their title as follows:

(1) 'An act to provide for the assessment of real estate of railroad companies in stock law territory for local benefit,' ratified March 8, 1907. Pub. Laws 1907, p. 668, c. 459.

(2) 'An act to prescribe the hours of service of employees for railroad companies engaged in the operation of trains,' ratified March 8, 1907. Pub. Laws 1907, p. 665, c. 456.

(3) 'An act to authorize the Corporation Commission to require railroads to erect and maintain union depots in towns of 2,000 inhabitants,' ratified March 11, 1907. Pub. Laws 1907, p. 672, c. 465.

(4) 'An act to extend and enlarge the power of the Corporation Commission, ' ratified March 11, 1907. Pub. Laws 1907, p. 675, c. 469.

Complainant contends: That it has property in North Carolina devoted to the business of carriage, freight and passenger, of the assessed value for taxation of $26,134,865, and that of this amount $7,213,222.74 is devoted to the intrastate commerce of North Carolina. That the property of complainant, like all other property in North Carolina, is worth more commercially than its assessed tax valuation. That the bonded indebtedness of the complainant applicable to its North Carolina property, is $24,623,078.29. The annual interest charge on said indebtedness is $714,103.08. In addition to its annual interest charge, complainant is compelled to pay for rentals and trackage in North Carolina $481,189.99. That the part of said interest, rental, and trackage charges devoted to intrastate business in North Carolina is $329,900.89 per annum, and this does not consider any question of stock or dividends on stock. The defendants in their answer admit the passage of the laws referred to, and admit the tax valuation of the property, deny any knowledge of the validity of the bonded indebtedness or the amount thereof, but allege that it is in excess of the value of the property, and allege that the complainant's stock is watered, and that the amount of bonded indebtedness and the amount of stock are merely items and elements in ascertaining the value of the property, and in ascertaining what is a just, fair, and reasonable compensation in fixing the rates.

The complainant contends that the effect of the act in respect to freight rates, and of the act in respect to passenger rates, whether taken separately or together, would, if enforced, as will appear from the figures stated in the bill, be to deprive the complainant of its property without due process of law. The complainant contends that under the laws of North Carolina the Corporation Commission is charged with the duty of making just and reasonable rates for the transportation both of freight and passengers; that it is charged with the duty of making full investigation of every element which enters into and constitutes one of the things required to be considered in fixing such rate; that prior to March 2, 1907, the Corporation Commission, after full investigation as required by law, made and established a passenger rate for complainant's lines of 3 1/4 cents per mile for first-class fare and 2 3/4 cents per mile for second-class fare, and established the present standard tariff of freight rates, and provided that, where there was a haul over two connecting lines, the rate charged by such common carriers should be the sum of the locals, less 15 per cent. Complainant contends that these rates are in the main reasonable and just, and that the same were fixed by the body charged under the law with that duty, and, wherever they are unreasonable and unjust, they are too low, and should be increased.

The complainant contends that its existing rate fabric is upon the whole property adjusted, not only in its relation to intrastate tariff, but in its relation between its interstate rates and its intrastate rates in North Carolina and in other states. It admits that there may be cited a few instances needing correction, but alleges that they are negligible, and not to be considered in this matter; that the present rates do not yield more than a just and reasonable return upon the value of the property used in the service; and that the rate charged is not higher than a just and reasonable compensation for the service rendered, whether considered on the basis of a fair return of the money invested or in respect to the service rendered. The complainant contends that the effect of the act in respect to passenger rates and the act in respect to freight rates, whether taken separately or together, if enforced, would be to so reduce the return to complainant for the service rendered that it would deprive complainant of its property without just compensation, without due process of law, and deny to it the equal protection of the laws, and would interfere with interstate commerce. Complainant contends, if the rates mentioned are put into effect and enforced, they would reduce the revenue of complainant upon its intrastate business about $300,000 per annum; that the effect of this reduction would be to leave to the complainant only about $29,000 net earnings from its intrastate business, assuming that the costs of operation...