Laird v. Baltimore & O. R. Co.
| Decision Date | 25 June 1913 |
| Citation | 88 A. 348,121 Md. 179 |
| Parties | LAIRD et al., Public Service Commission, v. BALTIMORE & O. R. CO. |
| Court | Maryland Court of Appeals |
Appeals from Circuit Court No. 2 of Baltimore City; James P. Gorter Judge.
Bills by Philip D. Laird and others, constituting the Public Service Commission, against the Baltimore & Ohio Railroad Company, a corporation. From a decree for complainants defendant appeals. Remanded for modification.
Under date of January 9, 1913, the Baltimore & Ohio Railroad Company issued a circular letter to its stockholders. From this it appeared that the company proposed to issue as of March 1, 1913 $63,250,000 gold bonds of the company, which were to run for 20 years from their date of issue and to bear interest at the rate of 4 1/2 per cent. per annum. The circular further stated that these bonds so to be issued were to be convertible into common stock of the company on the basis of $110 per share at any time prior to February 28, 1923, and that thereafter by giving 90 days' previous notice, the company should be entitled to redeem the bonds on any interest date at 102 1/2 per cent. While the circular letter was not explicit as to the property which was to be pledged by way of mortgage to secure the proposed issue, by inference it was to cover the main lines upon which there had been issued what was termed its prior lien mortgage, the Pittsburg Junction and Middle Division, the Southwestern Division, the Pittsburg, Lake Erie & West Virginia System, and all of the lines of railroad owned by any company and stock of which is pledged or assigned under any of the mortgages already placed upon any of the above-named divisions. The bonds which the company thus proposed to issue were offered to the stockholders at 95 1/2 and accrued interest. Prior to the issue of this circular letter, no application had been made to the Public Service Commission of the state for its order authorizing and approving of this issue. Accordingly, on February 19, 1913, the Public Service Commission of this state, acting under the provisions of section 28 of the Public Service Act of 1910, filed a bill in the circuit court No. 2 of Baltimore city, praying for an injunction restraining the railroad company from issuing the proposed bonds, or any of them, "until such time as there shall have been secured from the Public Service Commission an order authorizing such issue."
Two days after the bill was filed, the railroad company answered fully, setting up the various provisions of its charter denying that it was a corporation subject to the provisions of the Public Service Commission Act, setting out the act of the Legislature of Virginia of 1827 confirming the act of incorporation passed by the General Assembly of this state, averring that it owned and operated 281 miles of railroad in this state, 996 in the state of West Virginia, and through the other lines forming its system and extending through a number of states, a total mileage of 4,450. The answer further sets out that the issue of the bonds was necessary for the acquisition of property, the construction, completion, extension, improvement, and maintenance of its facilities and its service, and the discharge and lawful refunding of its obligations; that the balance of the moneys raised by the said issue of bonds, after the refunding of such obligations as were to be refunded, was to be expended largely in West Virginia. This answer was sworn to, and the case was heard in the first instance upon the bill, answer, and exhibits. The case thus presents two subjects for consideration: First, whether the Baltimore & Ohio Railroad Company is subject in any respect to the jurisdiction of the Public Service Commission of Maryland; and, secondly, if it is, how far or to what extent does that jurisdiction extend?
It is not attempted to be denied that, both before and after the passage of the Public Service Commission Act in 1910, the company was subject to the police power of the state. This might be, as was the case prior to 1910, exercised directly by the state and, in so far as the exercise of those powers was by the act conferred upon the Public Service Commission, might be exercised by it. Many of the cases cited in the brief filed on behalf of the Commission, and especially those from Massachusetts, illustrate this aspect of the case.
In addition to this power derived from the police power of the state, the Commission has conferred on it, in the interest of the general public, certain other powers in connection with the conduct of public service corporations doing business within the state. These will be found collected in section 3 of the act and, so far as this case is concerned, must come under one of the following enumerations: Through all of these runs the same fundamental idea that the power and control of the Commission exists as to matters of service, transportation, and rates within the state, and full power over that is expressly given to the Commission. This necessarily includes many matters which are not the subject-matter of an exercise of the police power. Thus questions of tariffs or fares, or the adequacy or inadequacy of service, or facilities with regard to business conducted wholly within the state, may properly come within the jurisdiction of the Commission. In this connection the three opinions by the late Chief Justice Waite in the cases of C., B. & Q. v. Iowa, 94 U.S. 155, 24 L.Ed. 94, Peik v. Chicago & N.W. R. R., 94 U.S. 164, 24 L.Ed. 97 and C., M. & St. P. v. Ackley, 94 U.S. 179, 24 L.Ed. 99, are directly in point. In the first case the Chicago, Burlington & Quincy Railroad was operating as lessee the Missouri River Railroad Company, which latter was operated solely within the state of Iowa. The Legislature of Iowa passed an act establishing a maximum rate for railroads in that state. The decision held that the statute was applicable to that portion of the Chicago, Burlington & Quincy Railroad located in Iowa, upon the principle enunciated in Munn v. Illinois, 94 U.S. 113, 24 L.Ed. 77, which dealt with the rates to be charged for storage of grain in a warehouse situate in Illinois. And it is the same doctrine which is involved in the two other cases cited. It therefore follows that the Baltimore & Ohio Railroad Company is subject to the jurisdiction of the Public Service Commission of this state, both in respect to those matters which, coming under the police power of the state, have been confided to the Commission and to business conducted wholly within this state.
The present bill of complaint claims for the Commission a far wider jurisdiction. By reason of the location of the home office of the company in Maryland, it claims to possess a right to control the expenditure of moneys, the creating and issue of evidences of indebtedness, the prices at which such bonds or debentures shall be marketed, the necessity and expediency of the creation of this indebtedness, in general to direct the entire physical and fiscal policy of one of the great common carriers of this country over its entire system of 4,450 miles of railroad, of which but 281 are within this state and 4,169 located without the state, and one of which other states (West Virginia) might with equal propriety, by reason of the confirmatory act of Virginia of 1827 and the far greater amount of mileage in that state, make a similar claim. The statement of the claim, taken with the terms of the act of 1910, would seem to afford a conclusive answer to the proposition. When the act is carefully limited by its very terms to operations within this state, any line of reasoning which aims to extend it beyond is alike in flat contradiction of the act and entirely beyond the power of the state to adopt. The Commission makes this extraordinary claim of power under the following provisions of section 27 of the act: ...
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