Banton v. Belt Line Ry Corporation, 465

• Decision Date: 25 May 1925
• Docket Number: No. 465,465
• Citation: 268 U.S. 413,69 L.Ed. 1020,45 S.Ct. 534
• Parties: BANTON, Dist. Atty. of County of New York, et al. v. BELT LINE RY. CORPORATION
• Court: U.S. Supreme Court

268 U.S. 413

45 S.Ct. 534

69 L.Ed. 1020

BANTON, Dist. Atty. of County of New York, et al.

v BELT LINE RY. CORPORATION.

No. 465.

Argued March 11, 12, 1925.

Decided May 25, 1925.

[Syllabus from pages 413-415 intentionally omitted] Messrs. Howard Thayer Kingsbury, M. M. Fertig, and George P. Nicholson, all of New York City, for appellants.

Mr. A. T. Davison, of New York City, for appellee.

Mr. Justice BUTLER delivered the opinion of the Court.

This suit was commenced December 16, 1920, by appellee to enjoin the enforcement of an order of the New York Public Service Commission, First District (succeeded by the Transit Commission), made October 29, 1912. The order established joint routes on street railways in New York City and prescribed five cents as the maximum joint fare. Appellee's street railway formed a part of some of such routes. The complaint alleged that the order deprived appellee of any return on the value of its property used to perform the service covered by the joint fare complained of, and violated the due process and equal protection clauses of the Fourteenth Amendment, and prayed injunction against the enforcement of the order in respect of certain lines with which its railroad connected. A temporary injunction was granted by a court of three judges. Section 266, Judicial Code (Comp. St. § 1243); 273 F. 272. A master took the evidence and reported that the order was confiscatory. The district court confirmed his findings and entered decree as prayed. Appeal was taken under section 238, Judicial Code (Comp. St. § 1215).

1. Appellants contend that, when this suit was commenced, the rate-making process was not completed, and that the appellee had not exhausted its legal remedies in the state tribunals. The point is without merit. The order complained of had been in force for more than eight years. The laws of the state required it to be obeyed, and prescribed penalties for failure to comply with it. See section 56, Public Service Commission Law; chapter 48, Consolidated Laws New York. May 11, 1920, the receiver of the New York Street Railways Company applied to the commission to be relieved from the requirements of the order, and, May 18, appellee joined in that application and prayed for the elimination of the joint fare between its lines and the lines of other companies, except those of the Third Avenue Railway Company and the Forty-Second Street, Manhattanville & St. Nicholas Avenue Railway Company. May 22, appellee filed with the commission a revised joint tariff, to take effect June 22, eliminating the joint fare of five cents. But on June 18, the commission suspended this tariff, and so compelled appellee to continue to comply with the order of October 29, 1912. July 9, the commission found the fare of five cents too low and prescribed in its stead a joint fare of seven cents, to take effect September 13. Appellee, on July 23, applied for a rehearing under section 22 of the Public Service Commission Law. It alleged that the joint fare of seven cents would be confiscatory; and that the evidence submitted had no reference to a joint or through rate of seven cents. August 28, the receiver also applied for a rehearing. August 31, the commission granted a rehearing to commence November 5, and postponed the taking effect of the joint fare of seven cents until such time as the commission might fix, at or after the termination of the rehearing. On November 5, the rehearing was commenced, and the testimony was closed November 10. There has been no determination of the matter by the commission, and so the order fixing joint fares at seven cents never took effect. Neither the original application nor the petition for rehearing relieved appellee of the burden of compliance with the order of October 29, 1912. No application to the commission for relief was required by the state law. None was necessary as a condition precedent to the suit. See Prendergast v. N. Y. Tel. Co., 262 U. S. 43, 48, 43 S. Ct. 466, 67 L. Ed. 853; United States v. Abilene & So. Ry. Co., 265 U. S. 274, 282, 44 S. Ct. 565, 68 L. Ed. 1016. On the point under consideration, it must be assumed that the joint fare of five cents was confiscatory as alleged. The continued enforcement of that rate would operate to take appellee's property without just compensation and to compel it to suffer daily confiscation. Notwithstanding the matter was pending on rehearing, the appellee had the right to sue in the federal court to enjoin the enforcement of the rate. It was not bound to await final action by the commission and, if the rate was in fact confiscatory, to serve in the meantime without just compensation. See Pacific Telephone Co. v. Kuykendall, 265 U. S. 196, 204, 44 S. Ct. 553, 68 L. Ed. 975; Oklahoma Gas Co. v. Russell, 261 U. S. 290, 293, 43 S. Ct. 353, 67 L. Ed. 659; Love v. Atchison, T. & S. F. Ry. Co., 185 F. 321, 326, 107 C. C. A. 403.

2. Appellants complaint that appellee has not sought injunction against the operation of the order as to the lines of the Third Avenue Company—which owns the stock of the appellee—and asserts that a diversion of traffic from other lines to that company has resulted from the injunction. The lines, as to which the order was enjoined, are relieved by the decree from the obligation of dividing the joint fare of five cents. If the rates enjoined are confiscatory, appellee is entitled to relief, notwithstanding its obedience to the order in respect of other lines and fares. It was not bound to attack the prescribed rates as to all the routes. It is not suggested that the commission is without power to prescribe equal and nonconfiscatory rates. The effect of the injunction on the business of the Third Avenue Company and its competitors is not involved in this suit; nor are they complaining.

3. Appellants insist that the appellee voluntarily assumed the obligation to carry transfer passengers pursuant to the order of October 29, 1912, for two cents each; and having been incorporated and having acquired its property subsequent and subject to such order, it is not entitled to complain of the order as an infringement of any constitutional right.

The commission had power to establish through rates and fix joint fares. The law required street railroad corporations to comply with every order made by the commission, and prescribed penalties to enforce such orders. See subdivision 3, § 49; section 56, Public Service Commission Law, supra. The Central Park, North & East River Railroad Company, appellee's predecessor, accepted the order, and put in effect the prescribed joint fare of five cents. There is no suggestion that it was not bound to do so, or that the order was not then valid and binding on the company. A rate that is just and reasonable, when prescribed, subsequently may become too low, unreasonable, and confiscatory. See Bluefield Co. v. Public Service Commission, 262 U. S. 679, 693, 43 S. Ct. 675, 67 L. Ed. 1176; Galveston Electric Co. v. Galveston, 258 U. S. 388, 400, 42 S. Ct. 351, 66 L. Ed. 678. That company did not agree to serve for the prescribed joint fare of five cents, and was not bound to do so if the rate was found to be, or if thereafter it should become, confiscatory. It did not surrender the protection of the Fourteenth Amendment.

The Central Park Company, many years before the order of October 29, 1912, was made, gave a mortgage on all its property, rights, and franchises. November 14, 1912, one Cornell purchased at foreclosure sale. December 24, 1912, under section 9 (now section 96 [Laws 1923, c. 787]) of the Stock Corporation Law, chapter 59, Consolidated Laws New York, Cornell and others became incorporated as the Belt Line Railway Corporation, the appellee. That corporation through such sale and by virtue of the provisions of section 9 succeeded to 'all the rights, privileges and franchises which at the time of such sale belonged to, or were vested in the corporation last owning the property sold,' and became 'subject to all the provisions, duties and liabilities imposed by law on that [the predecessor] corporation.' The franchise of the mortgagor was not destroyed. People v. O'Brien, 111 N. Y. 1, 41, et seq., 18 N. E. 692, 2 L. R. A. 255, 7 Am. St. Rep. 684. The rights of the mortgagee and of the purchasers were inviolable. People ex rel. Third Avenue Ry. Co. v. Public Service Commission, 203 N. Y. 299, 308, 96 N. E. 1011. There is nothing in appellee's certificate of incorporation or the laws under which it was organized that imposes upon it any obligation to continue to serve for a portion of the joint fare of five cents. The commission's order constitutes no part of the charter of appellee; and we find no agreement by appellee, expressed or implied, to comply with the order. The District Court rightly held that interstate Railway Co. v. Massachusetts, 207 U. S. 79, 28 S. Ct. 26, 52 L. Ed. 111, 12 Ann. Cas. 555, does not apply.

4. It is asserted that the transfer order was not confiscatory, because it was a reasonable service requirement, and also because the additional expense which would be involved by a resumption of transfers would not exceed the additional revenue which would be derived from transfer passengers.

The order was made under subdivision 3, § 49, Public Commission Law, supra. Its purpose was to enable a passenger, by making a change from the car of one company to the car of another, to ride on the lines of both for a single fare of five cents. The service was not affected by the order. Change of cars remained necessary. The designation of transfer points and the requirement that transfer tickets be given and received by carriers were for the purpose of giving to the passenger the additional transportation without additional payment. The amount of the fare prescribed was not essential and had no relation to the use of connecting lines for a continuous journey. The state has power to require street railways and like utilities to provide reasonably...