Southern Pac Co. v. Board of R. R Com'rs of California

• Decision Date: 30 November 1896
• Docket Number: 12,127.
• Citation: 78 F. 236
• Parties: SOUTHERN PAC. CO. v. BOARD OF RAILROAD COM'RS OF CALIFORNIA et al. (UNITED STATES, Intervener).
• Court: U.S. District Court — Northern District of California

78 F. 236

SOUTHERN PAC. CO. v. BOARD OF RAILROAD COM'RS OF CALIFORNIA et al. (UNITED STATES, Intervener).

No. 12,127.

United States Circuit Court, N.D. California.

November 30, 1896

[Copyrighted Material Omitted]

The Southern Pacific Company is a corporation organized under a special act of the legislature of Kentucky, and operating under leases, a number of railroads, in California and other states and territories, constituting its Pacific System.

On September 12 and 13, 1895, the board of railroad commissioners of California, acting under the powers conferred on it by section 22, art. 12, of the constitution of California, and by the act of the legislature of April 15 1880, passed two resolutions, the first of which, adopted unanimously, and known as the 'Grain Resolution,' was as follows:

'Resolved, that the rates at present existing for the transportation of grain In California by the Southern Pacific Company, and its leased lines, as established by grain tariff No. 2 and all subsequent amendments thereto, be, and the same are hereby, reduced 8 per cent.; and the secretary of this board is hereby directed forthwith to prepare for publication by this board a schedule of rates in accordance herewith; and, when so prepared, the same shall be published at once, and take effect as soon thereafter as allowed by law, and that on the adoption of the revised general freight tariff of said company, herein provided for, any further per cent. deduction due said grain tariff, as provided herein, shall be given.'

The second, adopted by the votes of Commissioners La Rue and Station, against the vote of Commissioner Clark, and known as the '25 Per Cent. Resolution,' was as follows:

'Resolved, that the present rates of charges for the transportation of freights in California by the Southern Pacific Company and its leased lines are unjust to the shippers of the state. There be it resolved, that the present rate of charges for the transportation of freights in California by the Southern Pacific Company and its leased liens be subjected to such an average reduction as including all reductions made therein since December 1, 1894, shall equal an average reduction of 25 per cent. upon said rates, as in existence on said December 1, 1894. Resolved, that this board proceed at once to adopt a revised schedule of rates in accordance herewith, in order that the same may be in force on or before January 1, 1896. And be it further resolved, that, if the necessities of the case so require, this board will at once proceed to the ascertainment of the proportion of the reduction due any commodity which, by reason of its nature, requires to be moved between now and the time herein fixed of the taking effect of said general reduction.'

On October 14, 1895, the Southern Pacific Company filed its bill against the board of railroad commissioners, seeking to enjoin the enforcement of these resolutions, and obtained a temporary restraining order, with an order to show cause why it should not be continued. The United States also intervened in support of the prayer for an injunction; and affidavits and other proofs were submitted by all parties, with full arguments upon the question of the continuance of the injunction.

W. F. Herrin (J. C. Martin, J. E. Foulds, E. S. Pillsbury, and John Garber, of counsel, for complainant.

W. F. Fitzgerald, Atty. Gen. of California (Robt. Y. Hayne and W. W. Foote, of counsel), for defendants.

H. S. Foote, U.S. Atty.

McKENNA Circuit Judge.

This suit is brought against the board of railroad commissioners, to enjoin them from enforcing a certain resolution reducing the rates on grain and other freight on the lines of railroad operated by complainant. The bill is too long to quote in full; hence I shall give only such summary of its important allegations as will assist the understanding of this opinion.

It alleges the jurisdictional facts and the official character of respondents, and that the complainant is a corporation, and was incorporated and organized by an act of the commonwealth of Kentucky, empowering it to operate the lines of railroads described, and operating them as one system, generally known as the 'Pacific System,' of complainant. That it has a paid-up capital stock of $120,934,170, distributed among 150 shareholders. The lines of railroads are given by name, with their respective mileage and termini. That certain of said roads have an outstanding indebtedness, incurred for their construction and equipment, represented by interest bearing bonds, and secured by mortgage. The amount of indebtedness and the annual interest are given. That, by the leases to it, complainant is required to operate and maintain said roads in good repair, pay taxes, and provide for the payment of the interest aforesaid, which amounts, in the aggregate, to $8,420,000 or thereabouts. That to some of said roads complainant is obliged to pay a certain rent, and to pay certain sums to the government of the United States. The amount of rent and such sums are given, and, as far as necessary, will be referred to hereafter. That none of the lessor companies, except the California Pacific Company and Northern Railway Company, have, for more than a year last past, received or been entitled to any profit or net income whatever, or been able to pay any dividend to stockholders. That the rent received by the California Pacific Company and Northern Railway Company, after deducting necessary payments of interest and expenses, amounts to less than 2 1/2 per cent. per annum upon their respective capital stock; and that this must be expended in betterments and additions which are necessary for the proper operation and equipment of the road. That the cost and value of the properties largely exceeds the bonded indebtedness respectively thereon. That complainant has invested $4,832,491.78 in the purchase of property necessarily used and necessary to be used for and in connection with the operation of said roads as said Pacific System, and of said amount the sum of $4,000,000 is invested in California. That, in order to enable complainant to operate said road, it must receive income sufficient to pay expenses, interest, etc., and is entitled to some profit. That complainant is engaged in state and interstate traffic; and that the rates of the latter have been fixed in pursuance of the provisions of the act to regulate interstate commerce; and that the rates on state traffic have been fixed as to the roads in California and Oregon by the board of railroad commissioners of said states, and in Nevada and the territories, in accordance with the laws thereof, respectively. That the rates upon freight arising and transported entirely in California are now lower, both actually and relatively, than the rates on freight arising and transported entirely within either of the other states, and, when established, were no more than sufficient to operate said roads down to the commencement of the year 1894; and that in that year an unusual depression in business occurred, so reducing the business of the complainant as to render its income insufficient to pay expenses, as hereinbefore set forth. That said depression, it is alleged on information and belief, will not be relieved; and that the business will not be increased during the present or the next ensuing year. That from time to time reductions have been made in rates, and from January, 1889, to June, 1895, to the amount of more than 35 per cent. A table, showing the reduction by years, is given in the bill. That the total receipts and expenditures of the Pacific System, during the calendar year 1894, were as follows:

Receipts .....................	$31,458,522 64
Expenditures ..................	31,734,785 34
	--------------
Showing a deficiency of ..	$ 276,262 70

-- The items of receipts and expenditures are given. That the total receipts for the first six months of the current year (1895), from the 1st day of January to the 30th day of June, for the Pacific System, were as follows:

Receipts .....................	$14,836,125 77
Expenditures ..................	16,312,302 16
	--------------
Leaving a deficiency of ..	$ 1,476,176 39

-- The items are given. That there has been, at all times, economy of operation; and that the operation of said road as a system is a convenience to the public. The number of officers employed is alleged to be 71, who received a daily compensation of $16.25; total yearly compensation, $361,079.04. All its other employes, numbering 15,064, received an average daily compensation of $2.54; total yearly compensation, $11,972,667.73. That these rates were not unreasonable. That the rates in force upon the several railroads operated by complainant have been fixed according to circumstances and conditions surrounding the traffic, and with a careful regard to those conditions which affect their relative adjustment and classification, and are fair to shippers, and, in many cases, are fixed at the actual cost of transportation by reason of water and railroad competition. That, notwithstanding the premises, the board of railroad commissioners did, on the 12th and 13th days of September, 1895, pass and adopt the resolutions complained of. They are set out in the bill, and, as the 25 per cent. resolution is given hereafter, I omit that here. The grain resolution is as follows:

'Resolved, that the rates at present existing for the transportation of grain in California by the Southern Pacific Company, and its leased lines, as established by grain tariff No. 2, and all subsequent amendments thereto, be, and the same are hereby, reduced 8 per cent.; and the secretary of this board is hereby directed forthwith

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