Chicago, I.&L. Ry. Co. v. Southern Indiana Ry. Co.

• Decision Date: 06 April 1904
• Court: Indiana Appellate Court
• Parties: CHICAGO, I. & L. RY. CO. v. SOUTHERN INDIANA RY. CO.

38 Ind.App. 234

70 N.E. 843

CHICAGO, I. & L. RY. CO.

v.SOUTHERN INDIANA RY. CO.^*

Appellate Court of Indiana.

April 6, 1904.

Appeal from Circuit Court, Lawrence County; W. H. Martin, Judge.

Action by the Chicago, Indianapolis & Louisville Railway Company against the Southern Indiana Railway Company. From a judgment rendered on sustaining demurrers to the complaint, plaintiff appeals. Affirmed.E. C. Field, G. W. Kretzinger, and H. R. Kurrie, for appellant. F. M. Trissal and Brooks & Brooks, for appellee.

ROBY, J.

Demurrers were sustained to each of the three paragraphs of appellant's complaint, and the correctness or such action is the question for decision.

A written contract, executed by the Louisville, New Albany & Chicago Railway Company as the party of the first part, and by the Evansville & Richmond Railway Company as party of the second part, is filed with each paragraph and forms the basis for the relief prayed, which in the first and second paragraphs is specific performance of the contract, and in the third judgment for the reasonable cost of constructing the interlocking switch specified therein. The averments are made that appellant succeeded to the rights of the Louisville, New Albany & Chicago Railway Company, and that appellee holds the title of the Evansville & Richmond Railway Company, and that the one has the right to enforce and the other is bound by the contract in question. This is not controverted, so that the rights of the parties will not be different from what they would be, had the agreement been between them originally, and the terms “first party” and “second party,” when used in this opinion, will be used as applicable to appellant and appellee, respectively.

The contract made on July 29, 1889, in terms grants to the second party the right to construct and operate its railroad over and across the main track and switches owned by the first party at a designated distance north of the Bedford telegraph office upon certain specified conditions, which the second party bound itself to perform. The substance of these conditions was that the second party should furnish all materials and perform all labor necessary to raise a certain switch track belonging to the first party, to furnish all material and perform all labor incident to the construction and maintenance of the crossing, including an interlocking switch and signal system. In event that the first party should thereafter wish to construct additional tracks, it agreed to adapt its own tracks thereto and pay one-half of the expense of whatever else (frogs, signals, etc.) might be necessary to make the crossing safe. It was further stipulated that proper appliances were to be used in such improvement, and that employés performing service at said crossing should be subject to removal at the demand of the first party. The second party bound itself to hold the first party harmless from cost and damage resulting from the construction of the use of said crossing. The concluding clauses of the contract were of the tenor following:

“Sixth. The second party agrees not to run any track or tracks to or from any stone quarry which is connected with the road of the first party, by switches or tracks built thereto by said first party or under contract therefor, and will not make any demands for the use of said first party's tracks or switches leading to any such quarries, for the shipment of stone therefrom, the express purpose of this clause being to preserve the said party all rights and benefits' now acquired in the business of such quarries; and it is hereby expressly understood and agreed that the consideration for granting the rights and privileges herein expressed to said second party is the covenant and agreement of said second party not in any manner, directly or indirectly, to interfere with or divert the benefits now derived or to be hereafter derived from said first party's connection and business with such quarries.

“Seventh. In consideration of making a Y connection, it is agreed between the parties hereto that, in case any party or parties require said first party to forward stone or other car-load freight to the line of the second company, it is agreed that the proportion of the through rate from any given quarry or station accruing to the party of the first part shall not be less than three cents per hundred (100) pounds.”

By clause 6 the second party agreed not to run any track into any stone quarry connected by switches or tracks with the road of first party, and not to demand the use of such tracks for the shipment of stone; “the express purpose of this clause being to preserve the said first party all rights and benefits now acquired in the business of such quarries.” The concluding portion of the clause contains a further agreement by the second party not to “directly or indirectly interfere with or divert the benefits now derived or to be hereafter derived from said first party's connection and business with such quarries.” This clause clearly states the purpose for which it is drawn. Its effect, and its intended effect, is to deprive a class of citizens engaged in a certain business of advantages that might accrue to them from the facilities afforded them for the shipment of their merchandise over a competing railroad. By this agreement the two railroad companies undertook to contract away the rights of third parties, without their knowledge, and in defiance of the public duty devolved upon such companies. That the contracting parties were conscious of the quality of such undertaking is indicated by the seventh clause of the contract, where, in case “any party or parties require said first party to forward stone *** to the line of the second party,” then, irrespective of distance, at least three cents per 100 pounds must be paid first party for its share of the through rate; a stipulation the effect of which is to deprive the shipper of the benefit of competition, should he demand that the second party discharge its public duty by furnishing transportation facilities to him.

The policy of the law is to prevent the creation of monopolies and to foster fair competition. Eel River v. State, 155 Ind. 433-457, 57 N. E. 388; Railroad v. Dohn, 153 Ind. 10, 53 N. E. 937, 45 L. R. A. 427, 74 Am. St. Rep. 274;State ex rel. v. Portland, etc., Oil Co., 153 Ind. 489, 53 N. E. 1089, 53 L. R. A. 413, 74 Am. St. Rep. 314;Board v. Railway, 50 Ind. 85; Elliott, § 359. “A contract between corporations charged with a public duty, such as that of common carriers, providing for the formation of a combination, having no other purpose than that of stifling competition, and providing means to accomplish that object, is illegal. The purpose to break down competition poisons the whole contract, and there is no antidote which will rescue it from legal death.” Cleveland, etc., Ry. v. Closser, 126 Ind. 348-361, 26 N. E. 159, 9 L. R. A. 754, 22 Am. St. Rep. 593. The important thing to be secured was, the court declared in the case above cited, a sound and salutary general principle, and not merely cases with closely resembling facts. The principle declared, as heretofore quoted, accords with the necessities of commerce and development, and is supported by a vast volume of authority, including the following: L., N. A. & C. Ry. Co. v. Sumner, 106 Ind. 55-59, 5 N. E. 404, 55 Am. Rep. 719;St. Louis Ry. Co. v. Mathers, 71 Ill. 592, 22 Am. Rep. 122; Greenhood on Public Policy, p. 626; Kettle River Co. v. Eastern Ry., 43 N. W. 469, 6 L. R. A. 117;Trans. Co. v. Pipe Line Co., 22 W. Va. 626, 46 Am. Rep. 527.

It is contended in argument that it was competent to make the contract in question, in order to prevent destructive competition. There is no basis of fact justifying the proposition. A combination between common carriers to prevent competition is prima facie illegal. “The burden is on the carriers to remove the presumption, and until it is removed the agreement goes down before the presumption, and is held within the condemnation directed against all contracts violative of public policy.” Cleveland, etc., Ry. v. Closser, 126 Ind. 360, 26 N. E. 159, 9 L. R. A. 754, 22 Am. St. Rep. 593; State ex rel. v. Portland Oil Co., supra. The appellee railroad company has power, by the provisions of the statute, to purchase, receive, and take such lands as may be necessary to the construction and maintenance of its railroad, stations, depots, and other accommodations necessary to accomplish the objects for which the corporation was created. Section 5153, Burns' Ann. St. 1901. The statute also makes it the duty of the railroad corporations to furnish sufficient accommodations for the transportation of all such persons and property as shall within a reasonable time previous thereto offer or be offered for transportation at the place of starting, at the junction of other railroads, and at sidings and stopping places established for receiving way passengers and freight. Section 5185, Burns' Ann. St. 1901. It has frequently been adjudged that contracts of a railroad company, by which it undertakes not to locate stations or depots within prescribed limits, are contrary to public policy and void. L., N. A. & C. Ry. v. Sumner, supra; Railroad v. Ryan, 11 Kan. 602, 15 Am. Rep. 357;Florida Cent. R. Co. v. Tavares, 31 Fla. 482, 13 South. 103, 20 L. R. A. 419, 34 Am. St. Rep. 30;Elkhart v. Cary, 98 Ind. 238, 49 Am. Rep. 746. The analogy between an agreement not to furnish facilities for transportation by the location of depots, and an agreement not to furnish facilities for transportation by the location of certain side tracks, is exact.

No question of the exercise of the right of eminent domain is involved in this appeal. It is not even shown that it would be necessary to condemn or purchase any land in order to reach the stone quarries, that are presumptively within reach of appellee's railroad. So far as facts are shown, its right of way may abut upon any...