Augusta-Aiken Ry. & Electric Corp. v. Railroad Commission of South Carolina

• Citation: 281 F. 977
• Decision Date: 06 June 1922
• Docket Number: 1963.
• Parties: AUGUSTA-AIKEN RY. & ELECTRIC CORPORATION v. RAILROAD COMMISSION OF SOUTH CAROLINA et al.
• Court: U.S. Court of Appeals — Fourth Circuit

281 F. 977

AUGUSTA-AIKEN RY. & ELECTRIC CORPORATION v. RAILROAD COMMISSION OF SOUTH CAROLINA et al.

No. 1963.

United States Court of Appeals, Fourth Circuit.

June 6, 1922

Boykin Wright, of Augusta, Ga., and William Elliott, of Columbia S.C. (George T. Jackson, of Augusta, Ga., and W. C. McLain of Columbia, S.C., on the brief), for appellant.

Samuel M. Wolfe, Atty. Gen., of South Carolina (John M. Daniel Asst. Atty. Gen., of South Carolina, and John F. Williams, of Aiken, S.C., on the brief), for appellees.

Before KNAPP, WOODS, and WADDILL, Circuit Judges.

PER CURIAM.

The essential facts are these: The Augusta-Aiken Railway &amp Electric Corporation, appellant here, operates an electric railway, 23.9 miles in length, between the cities of Aiken S.C., and Augusta, Ga. All but half a mile of this railway is in South Carolina, and the jurisdiction of the Railroad Commission of that state is conceded. In 1917 the company divided its road into eight zones, and established a rate of 5 cents for each zone, or 40 cents from one city to the other. This rate is still in force, and under the laws of South Carolina cannot be raised without consent of the Railroad Commission.

In February, 1921, the company applied to the commission for leave to increase this rate to 9 cents a zone, or 72 cents for the entire trip, setting out in its petition that earnings for the year 1920 were not only insufficient to yield any return whatever on the value of its property, but left a deficit of more than $25,000, after paying operating expenses and making proper deductions for depreciation, taxes, insurance, and other charges. A hearing on this petition was had in April, and a report made in the following August, in which among other things, the commission says:

'The railway company produced exhibits showing the amount of revenue and operating costs for a period of five years, commencing in 1915 and ending December 31, 1920. Only one of these years, 1918, showed any profit whatever, and that amounted to only $311.56. During the years 1915, 1916, and 1917, the losses were, in round figures, $23,000. In 1919 this was reduced to less than $12,000. In 1920 the deficit amounts to $25,436.01.'

Notwithstanding this showing, the Commission refused permission to increase the rate, but instead ordered a reduction of service to the extent of practically one-half, on the theory that reduced cost of operation would afford financial relief. Shortly thereafter, in September, 1921, this suit was brought against the commission and its members to enjoin the enforcement of the 5-cent rate, and for such other relief as might be just and equitable.

At the hearing in October on motion for a temporary injunction, the company made proof, by its verified complaint and attached exhibits, and by other evidence, that the operation of its road in 1920 resulted in a deficit of $25,436.01, as had been before shown to the commission, and that for the first six months of 1921 the deficit amounted to $45,631.97. It was also shown that the daily loss had increased under the reduced service which the commission ordered. The defendants made no attempt to dispute these figures or to prove the facts to be otherwise. As a result of this hearing the court below enjoined the order for reduction of service, on the ground that the commission had no authority to make such an order, but for reasons stated in its opinion refused to enjoin enforcement of the 5-cent rate pending a trial of the case. The company appeals.

The refusal to grant a temporary injunction appears to be based on the ground, first, that by accepting its charter, of which the laws of the state must be deemed a part, the company bound itself to accept whatever rate the Railroad Commission might fix, or, stated in another way, estopped itself from denying the reasonableness of the rate fixed by the commission, and that its only remedy, if it cannot live under that rate, is to surrender its charter and go out of business. But the record discloses no contractual relations between the company and the state. The commission is without power to make rates by contract; its only power, delegated to it by the Legislature, is to fix reasonable rates (Code of South Carolina, Secs. 3174 and 3175), and chartered companies are not estopped from contesting the reasonableness or asserting the confiscatory character of rates fixed by the commission. As the Supreme Court has recently said in Southern Iowa Electric Co. v. Chariton, 255 U.S. 539, 541, 41 Sup.Ct. 400, 401 (65 L.Ed. 764), citing numerous prior decisions:

'That although the governmental agencies having authority to deal with the subject may fix and enforce reasonable rates to be paid public utility corporations for the services by them rendered, that power does not include the right to fix rates which are so low as to be confiscatory of the property of such corporations.'

As the facts of that case were more favorable to the contention here considered than are the facts of the instant case, it is enough to say that the rate under review was not fixed by contract, and that refusal of a temporary injunction cannot be sustained on the theory that the company is bound by contract obligation.

The further ground of refusal is indicated by the following excerpts from the opinion:

'Questions of this character have arisen in a

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