268 U.S. 413 (1925), 465, Banton v. Belt Line Railway Corporation

Docket Nº:No. 465
Citation:268 U.S. 413, 45 S.Ct. 534, 69 L.Ed. 1020
Party Name:Banton v. Belt Line Railway Corporation
Case Date:May 25, 1925
Court:United States Supreme Court

Page 413

268 U.S. 413 (1925)

45 S.Ct. 534, 69 L.Ed. 1020



Belt Line Railway Corporation

No. 465

United States Supreme Court

May 25, 1925

Argued March 11, 12, 1925




1. Where an order of the New York Public Service Commission establishing joint street railway routes with a maximum joint fare, long in force, became confiscatory as to one of the companies concerned, and remained obligatory under the state law notwithstanding an application for relief pending before the commission on rehearing, held that the company was not bound to await final action by the Commission and to serve in the meantime without just compensation before suing in the federal court for an injunction. P. 415.

2. The right of a street railway company to enjoin enforcement of such an order, made by a state Commission having power to establish equal and nonconfiscatory rates, is not affected by the facts that another company, whose railway may benefit from the injunction through diversions of traffic from competitors, owns all the stock of the plaintiff and does not itself seek to have the order enjoined. P. 417.

3. Mere acceptance and putting into effect by a street railway company of an order of the New York Public Service Commission fixing a rate obligatory by the state law and which presumably was valid at the time was not an agreement by that company to abide by the rate should it subsequently become confiscatory, nor is such consent to be imputed to a successor corporation because it was incorporated and acquired the first company's property while the order was in effect, where the acquisition was through foreclosure of a mortgage antedating the order, and under which the franchises of the first company passed unimpaired to the second, and where there is nothing in its certificate of incorporation or in the laws under which it was incorporated imposing on the second company an obligation to continue to serve for the fare fixed by the order. P. 417.

4. The power of a state to require street railways to provide reasonably adequate facilities and services even though compliance may be attended by some pecuniary disadvantage cannot justify an order enabling passengers, by transferring from one line to

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another, to ride on both for a fare so low as to deprive a company of any return on the value of the property used by it to perform the service; the state may not, under guise of regulation, compel the use and operation of a company's property for the public convenience without just compensation. P. 419.

5. The evidence in this case justifies the conclusion that resumption by the plaintiff street railway company of transfer business under an order establishing joint routes and a joint 5¢ fare, would require additional operating expenses in excess of the resulting increase of revenue, and that the company's fair share of the joint rate would be substantially less than the operating expenses and taxes justly chargeable to that business -- hence, the rate is confiscatory. P. 420.

6. In determining whether a rate fixed for transfer passengers constituting only part of the traffic of a street railway line is confiscatory, the cost of the transfer business is not the amount by which total operating expenses would be diminished by eliminating, or increased by adding, the transfer passengers, for those operating expenses which are incurred on account of all passengers carried, and incapable of allocation to any class, should be attributed to the transfer passengers in fair proportion with others receiving like service. P. 421.

7. While a carrier has no constitutional right to the same rate of return on all its business, the state may not select any class of traffic for arbitrary control and regulation. P. 421.

8. In a suit to enjoin enforcement of a rate fixed by a competent state Commission, the presumption is that the order was based on sufficient evidence and the burden is on the plaintiff to establish its invalidity. P. 422.

9. A commission or other legislative body, in its discretion, may determine to be reasonable and just a rate that is substantially higher than one merely sufficient to justify a judicial finding in a confiscation case that it is high enough to yield a just and reasonable return on the value of the property used to perform the service covered by the rate; rates substantially higher than the line between validity and unconstitutionality properly may be deemed to be just and reasonable, and not excessive or extortionate. P. 422.

10. A finding by a state commission that a street car rate is, by reason of changed operating conditions, "unjust, unreasonable, and insufficient to render a fair and reasonable return for the service furnished," plainly imports that the rate is confiscatory. P. 422.


Page 415

Appeal from a decree of the district court enjoining, enforcement of an order establishing joint street car routes and a maximum joint fare. See 273 F. 272.

BUTLER, J., lead opinion

MR. JUSTICE BUTLER delivered the opinion of the Court.

This suit was commenced December 16, 1920, by appellee to enjoin the enforcement of an order of the New York Public Service Commission, First District (succeeded by the Transit Commission) made October 29, 1912. The order established joint routes on street railways in New York City, and prescribed five cents as the maximum joint fare. Appellee's street railway formed a part of some of such routes. The complaint alleged that the order deprived appellee of any return on the value of its property used to perform the service covered by the joint fare complained of, and violated the due process and equal protection clauses of the Fourteenth Amendment, and prayed injunction against the enforcement of the order in respect of certain lines with which its railroad connected. A temporary injunction was granted by a court of three judges. Section 266, Judicial Code; 273 F. 272. A master took the evidence and reported that the order was confiscatory. The district court confirmed his findings and entered decree as prayed. Appeal was taken under § 238, Judicial Code.

1. Appellants contend that when this suit was commenced, the ratemaking process was not completed, and that the appellee had not exhausted its legal remedies in the state tribunals. The point is without merit. The order complained of had been in force for more than eight

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years. The laws of the state required it to be obeyed, and prescribed penalties for failure to comply with it. See § 56, Public Service Commission Law; c. 48, Consolidated Laws New York. May 11, 1920, the receiver of the New York Street Railways Company applied to the Commission to be relieved from the requirements of the order, and, May 18, appellee joined in that application and prayed for the elimination of the joint fare between its lines and the lines of other companies, except those of the Third Avenue Railway Company and the Forty-Second Street, Manhattanville & St. Nicholas Avenue Railway Company. May 22, appellee filed with the Commission a revised joint tariff, to take effect June 22, eliminating the joint fare of five cents. But, on June 18, the Commission suspended this tariff, and so compelled appellee to continue to comply with the order of October 29, 1912. July 9, the Commission found the fare of five cents too low, and prescribed in its stead a joint fare of seven cents, to take effect September 13. Appellee, on July 23, applied for a rehearing under § 22 of the Public Service Commission Law. It alleged that the joint fare of seven cents would be confiscatory, and that the evidence submitted had no reference to a joint or through rate of seven cents. August 28, the receiver also applied for a rehearing. August 31, the Commission granted a rehearing to commence November 5, and postponed the taking effect of the joint fare of seven cents until such time as the Commission might fix at or after the termination of the rehearing. On November 5, the rehearing was commenced, and the testimony was closed November 10. There has been no determination of the matter by the Commission, and so the order fixing joint fares at seven cents never took effect. Neither the original application nor the petition for rehearing relieved appellee of the burden of compliance with the order of October 29, 1912. No application to the Commission for relief was required by the state law. None was necessary

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as a condition precedent to the suit. See Prendergast v. N.Y. Tel. Co., 262 U.S. 43, 48; United States v. Abilene & So. Ry. Co., 265 U.S. 274, 282. On the point under consideration, it must be assumed that the joint fare of five cents was confiscatory, as alleged. The continued enforcement of that rate would operate to take appellee's property without just compensation and to compel it to suffer daily confiscation. Notwithstanding the matter was pending on rehearing, the appellee had the right to sue in the federal court to enjoin the enforcement of the rate. It was not bound to await final action by the Commission, and, if the rate was in fact confiscatory, to serve in the meantime without just compensation. See Pacific Telephone Co. v. Kuykendall, 265 U.S. 196, 204; Oklahoma Gas Co. v. Russell, 261 U.S. 290, 293; Love v. Atchison, T. & S.F. Ry. Co., 185 F. 321, 326.

2. Appellants complaint that appellee has not sought injunction against the operation of the order as to the lines of the Third Avenue Company -- which owns the stock of the appellee -- and asserts that a diversion of traffic from other lines to that company has resulted from the injunction. The lines as to...

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