Steele v. General Mills

Citation67 S.Ct. 439,91 L.Ed. 402,329 U.S. 433
Decision Date06 January 1947
Docket NumberNo. 79,79
PartiesSTEELE v. GENERAL MILLS, Inc
CourtUnited States Supreme Court

Mr.Cecil A. Morgan, of Fort Worth, Tex., for petitioner.

Mr. Alfred McKnight, of Fort Worth, Tex., for respondent.

Mr. Elton M. Hyder, Jr., of Austin, Tex., for State of Texas, amicus curiae.

Mr. Justice BLACK delivered the opinion of the Court.

Petitioner and respondent entered into a written contract under which the petitioner was to transport goods for respondent by truck entirely within the State of Texas at 'such rates, charges, or tariffs as may be fixed by the Railroad Commission of the State of Texas.' Based on that contract petitioner applied to the Commission for a permit to operate as a contract carrier pursuant to rules of the Railroad Commission promulgated under Texas law which grants regulatory power over transportation to that Commission. Article 911b, §§ 1 to 22b, Rev.Stat. of Tex. Petitioner's application stated that 'the tariff to be charged for the service proposed will be that as promulgated by the Railroad Commission of Texas.' After notice and hearing, at which petitioner and a representative of respondent testified, the Commission made an order which stated that 'After carefully considering the evidence, the laws and its own rules and regulations,' the Commission was of the opinion that 'the character of business proposed to be done by the applicant strictly conforms with the definition of a contract carrier.' The order directed that petitioner be granted a permit, which was later issued, to transport goods for respondent in Texas, but directed attention to the fact that the Commission's 'tariffs and orders prescribed as a minimum rate to be charged by contract carriers the rate prescribed for common motor carriers.' Later, pursuant to a prearrangement, the parties entered a supplemental agreement concerning which the Railroad Commission was kept uninformed, in accordance with which respondent actually paid petitioner for carriage of its goods less than the rates prescribed for common motor carriers. About three and a half years later the petitioner filed this suit, of which the District Court had jurisdiction by reason of diversity of citizenship, to recover the full rate fixed by prior general orders of the Commission prescribing common carrier rates as provided in the contract.

The respondent's answer admitted that it had paid less than the tariff rate fixed in prior general orders, but denied legal liability to pay that rate on several grounds. It denied that respondent's rates were governed by the Commission's prior general rate orders or by the special order granting petitioner a permit as a contract carrier. It also claimed that a State two-year statute of limitations barred recovery for part of the amount claimed. It further alleged that petitioner had led respondent to believe that his type of transportation was not subject to regulation by the Railroad Commission, and that no prior general or special orders had fixed petitioner's transportation rates. In reliance upon the petitioner's representations, respondent alleged, it had entered into the supplemental agreement to pay less than the tariff rate here claimed. Respondent pleaded that by this conduct petitioner was estopped from claiming that the Commission had power to or had fixed a rate for petitioner's transportation, or from predicating his cause of action upon the Commission's tariffs.

The District Court rejected all of respondent's contentions. Citing Texas statutes, court decisions, and the Commission's practices, the District Court held that the cause of action was not barred by the statute of limitations; that the Commission's prior general rate orders governed the charges to be fixed by contract carriers such as petitioner; that Texas law barred respondent from any collateral attack on the validity of the orders; that had the rate fixing orders been directly attacked, as authorized by law, they would have been held valid; that shippers and carriers could not by private agreements defeat the State's statutory purpose to require payments of uniform transportation rates; that the original agreement to pay the Commission-fixed rate was valid, and the supplemental agreement to pay less than that rate was void; and that, under Texas law, petitioner was not estopped to rely on the Commission's tariff in order to recover the full tariff rate. Accordingly, the District Court directed the jury to return a verdict for petitioner for the balance due it under the Commission rate, and a judgment for the petitioner was entered on that verdict.1

The Circuit Court of Appeals, one judge dissenting, reversed. General Mills v. Steele, 5 Cir., 154 F.2d 367. The majority concluded that petitioner should not recover because the agreement to pay less than the full rates was a subterfuge, that neither party had any intention of living up to the agr ement and that their conduct amounted to a fraud upon the Railroad Commission, 'contrary to good morals and that (it) tended to interfere with the purity of the administration of the law, such as puts both parties in pari delicto with no right to seek advantage of recovery * * *' on the 'spurious' contract. The dissenting judge did not agree that the records showed a deliberate purpose to evade the statutes. He further thought that under controlling Texas law and policy the doctrine of pari delicto could not be applied so as to have the goods of a Texas shipper hauled in Texas at a less rate than the others were compelled to pay by law. All the judges agreed, however, that the agreement to pay less than the Commission-fixed rates was void.

On petitioner's motion for rehearing the State Attorney General intervened. He contended that the court's decision ran counter to the State's long-established policy against discriminatory transportation rate-cutting, and that if the judgment stood, it would impair the integrity of the State's regulatory system, a primary purpose of which was, he argued, to assure uniform rates to all shippers for substantially the same transportation service. In its opinion denying rehearing, the court reaffirmed its former holding and stated that this was 'a suit by one party in particeps criminis, against another in like situation under a fully executed contract, whereon it was sought to penalize to the extent of $37,000 and to reward the prime offender in like amount.' Whether the Circuit Court of Appeals' judgment does undermine the transportation policy of Texas is a question of such importance that we granted certiorari to review the case. 328 U.S. 830, 66 S.Ct. 1341.

The District Court specifically held that no part of the claim sued on was barred by the Texas statute of limitations and the Circuit Court of Appeals did not discuss the question. Article 5526 of the Revised Statutes of Texas, on which respondent relies, by its language applies only to actions for debts not 'evidenced by a contract in writing.' The contract here sued on was 'in writing.' Respondent has cited no Texas decisions which have considered this statute to be a bar to suits on contracts such as the one here involved. We cannot say that the District Court sitting in Texas erred in holding that no part of the claim was barred by Article 5526. See Texarkana & Ft. S. Ry. Co., et al....

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    ...L.Ed. 645, 144 A.L.R. 719; MacGregor v. State Mutual Life Assur. Co., 315 U.S. 280, 62 S.Ct. 607, 86 L.Ed. 864; Steele v. General Mills, 329 U.S. 433, 439, 67 S.Ct. 439, 442. Cf. Wichita Royalty Co. v. City Nat. Bank, 306 U.S. 103, 59 S.Ct. 420, 83 L.Ed. The free pass in the present case st......
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    ...by Chief Justice Stone. 3 Helvering v. Stuart, 317 U.S. 154, 162—165, 63 S.Ct. 140, 144—146, 87 L.Ed. 154; cf. Steele v. General Mills, 329 U.S. 433, 67 S.Ct. 439, 91 L.Ed. 402. 1 The terms 'reverter' and 'the possibility of a reverter' have been used frequently and freely in opinions and d......
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    ...That construction of New Jersey law made by a federal judge of the New Jersey District Court is entitled to special weight. Steele v. General Mills, 67 S.Ct. 439. We find nothing which imperaches it. To hold otherwise might, indeed, imperil the claim which New Jersey so vigorously asserts. ......
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