Metropolitan Trust Co. v. Houston & T.C.R. Co.

• Decision Date: 01 December 1898
• Docket Number: 220-227,229.,228
• Citation: 90 F. 683
• Parties: METROPOLITAN TRUST CO. OF CITY OF NEW YORK v. HOUSTON & T.C.R. CO. et al. (ten cases).
• Court: U.S. District Court — Western District of Texas

90 F. 683

METROPOLITAN TRUST CO. OF CITY OF NEW YORK v. HOUSTON & T.C.R. CO. et al. (ten cases).

Nos. 228, 220-227, 229.

United States Circuit Court, W.D. Texas.

December 1, 1898

Farrar Jonas, Kruttschnitt & Gurley, for complainant.

Baker Botts, Baker & Lovett, for defendant Railway Co.

M. M Crane and F. A. Fuller, for Reagan and others.

McCORMICK Circuit Judge.

The constitution of Texas, as amended in 1890 (Const. art. 10 Sec. 2), provides:

'Railroads heretofore constructed or which may hereafter be constructed in this state are hereby declared public highways and railroad companies common carriers. The legislature shall pass laws to regulate railroad freight and passenger tariffs, to correct abuses, prevent unjust discrimination and extortion in the rates of freight and passenger tariffs on the different railroads in this state, and enforce the same by adequate penalties, and to the further accomplishment of these objects and purposes may provide and establish all requisite means and agencies, invested with such powers as may be deemed adequate and advisable.'

In execution of that provision of the constitution, the legislature of Texas passed an act to establish a railroad commission for the state, which act was approved April 3, 1891. Under it the commission was constituted, and began its work by promulgating tariffs for the carriage of freight from one point to another in the state. A number of tariffs, embracing substantially all the commodities which were the subject of freight charges in this state, were promulgated between the constitution of the commission and the 29th day of April, 1892, on which date the creditors of five of the railroads made parties defendant in the suits, the caption of which is given at the head of this opinion, exhibited their bills of complaint against the railroads, and against the members of the commission and the attorney general, exhibiting also the rates that had been promulgated by the commission and adopted by the railroads, and complaining that the rates were unreasonably low, were not compensatory, and were effecting and would effect the confiscation of the rights and properties of the complainant in the railroads, and in the securities thereof of which the complainant's rightful use, and appropriate it to the benefit of the public, without due process of law, and without allowing to the complainant's rights therein the just protection of the laws. On these bills, and after due notice to the defendants, a motion for an injunction pendente lite was presented to me, and heard in July, 1892. The defendant railroad companies answered, admitting substantially the allegations in the bills of complaint. They also took leave and filed cross bills, in which they set up substantially the same matters, and prayed for the same relief, as was pleaded and asked in the original bills. The defendants the railroad commissioners and the attorney general also answered fully, substantially denying the gravamen of the charges made by the original and the cross bills. After a full hearing the injunction pendente lite, substantially as prayed for, was granted, which at the hearing was perpetuated and made final. From this decree the commissioners and the attorney general appealed to the supreme court; and so much of the decree of the circuit court as restrained the enforcement of the rates which had been established by the railroad commission, and which were attacked in those suits, was affirmed. For a further statement of these cases I refer to the report thereof in 154 U.S. 362-420, 14 Sup.Ct. 1047-1062. In August, 1894, the railroad commission began to make and establish new rates, tariffs, schedules, classifications, and orders, which they promulgated and intended as schedules of rates of charges for the transportation of the articles named therein over the railways of the state, with modifications and exceptions as to certain of the railways and parts of railways set out in their published tariffs and circulars affecting the same. The rates established are not maximum rates, but in each instance are absolute rates, from which the carrier is not permitted to depart without previously obtained leave of the commission. The hearings before the commission, and the action thereof, have been almost continuous from August, 1894, to the 31st of October, 1898, when these bills were exhibited. On the 6th day of October, 1898, the commission had published a new tariff affecting the carriage of cotton in bales, which was to take effect, by a subsequent order postponing the date, on the 1st of November. The commission had also issued notice of other hearings to be had looking to the reduction of rates on other commodities, entering largely into the tonnage of the different carriers. The bills, duly verified, and supported by other affidavits, and accompanied by exhibits showing the rates that had been propounded and put into effect, and the rate that was to go into effect on the 1st day of November, were submitted to me on the 31st of October, with an application for a restraining order to prevent the going into effect of the new commodity tariff, I-- C, cotton in bales, until the hearing of the motion for injunction. The application was granted, and a restraining order issued in conformity thereto.

The bills in these 10 cases are substantially similar. The details as to the construction, mileage, incumbrances, and net earnings of the various roads differ, of course, the one from the other. The substance, however, in each case substantially shows the history of the construction or acquisition of the railroads, the operation and betterments, and the actual cost thereof, as nearly as it can be known or estimated, the capitalization of each, and the effect upon the net earnings of each by the rates fixed and enforced by the commission, showing in each case that the rates theretofore established voluntarily by the railway companies were reasonable, and such as competitive, commercial, and financial conditions warranted and required; that the system of rates now enforced by the commission, and proposed to be enforced, is unreasonably low, and lower than the rates enjoined in the former suits, to which reference has been made, and will and have in each instance so reduced the net earnings of each of the roads that neither they nor any of them can earn, nor have earned, revenue sufficient to meet their running expenses, including replacements and repairs, and such betterments as the advancing business of the roads and the requirements of such traffic render necessary to be made, and to earn a reasonable compensation for the services rendered in the transportation of the freights moved. They allege that each and all of the rates, rules, and regulations established by the railroad commission were made and established by the commission in pursuance of the design and purpose repeatedly avowed by it, and which are its settled policy, to reduce the rates of the railroad companies until they reach a level that will, when applied to the ordinary volume of traffic, yield to the company no more revenue than will be sufficient, after paying operating expenses and ordinary repairs, to pay a reasonable return in the way of interest or dividends on a sum which the commission has assumed and stated to be sufficient to construct a similar railroad at the present...