Louisville & N.R. Co. v. Ohio Valley Tie Co.

• Decision Date: 24 November 1914
• Citation: 170 S.W. 633,161 Ky. 212
• Parties: LOUISVILLE & N. R. CO. v. OHIO VALLEY TIE CO.
• Court: Kentucky Court of Appeals

170 S.W. 633

161 Ky. 212

LOUISVILLE & N. R. CO. v. OHIO VALLEY TIE CO.

Court of Appeals of Kentucky.

November 24, 1914

Appeal from Circuit Court, Jefferson County, Common Pleas Branch Second Division.

Action by the Ohio Valley Tie Company against the Louisville &amp Nashville Railroad Company. Judgment for the plaintiff, and defendant appeals. Affirmed.

Helm Bruce and Bruce & Bullitt, all of Louisville, for appellant.

Edward W. Hines, of Washington, D. C., and John Bryce Baskin and J Van Dyke Norman, both of Louisville, for appellee.

NUNN J.

This is an action by the Ohio Valley Tie Company to recover of the Louisville & Nashville Railroad Company $100,000 in damages for willful and malicious injury to business, inflicted by withholding numerous conveniences and accommodations furnished other shippers, and by imposing extortionate freight rates and other annoying burdens not imposed upon other shippers. It charges all of this was done for the willful and deliberate purpose, not only of injuring appellee's business, but of destroying it and thereby eliminating it as a competitor of the railroad company along its line for the purchase of cross-ties. The jury returned a verdict against the railroad company for $56,971.56. From the judgment on this verdict, this appeal is taken.

The jury's verdict was itemized (that is, had special findings), and $50,000 was awarded for damage to plaintiff's business and credit; $5,000 injury to ties; $1,000 attorney fees; $771.56 expense of transferring ties; and $200 for loss of time and services performed. Appellant contends there is no warrant in law for the recovery of any damages, and that, in any event, the verdict is flagrantly and grossly excessive.

The tie company was incorporated in 1903, with a capital of $50,000, but it did not locate its business on the lines of appellant until 1908. In the first year of its existence it handled about 250,000 ties. Its business grew every year, and in the fiscal year ending September 1, 1911, it handled 1,300,000 ties at a profit of $27,000, but in the fiscal year ending September 1, 1912, its business was reduced to 1,000,000 ties, and a loss sustained of $28,000. Theretofore it had never lost money; that is, its profits, beginning with $10,000 the first year, had gradually increased until the time of this loss in 1912. In order to understand the controversy, it should be explained that railroads maintain what are called class and commodity rates. A special rate is made to carry cheap and bulky commodities, which move in large quantities, like lumber, grain, and raw ores. Higher rates are charged on other commodities in proportion to their value, cost of carriage, and liability to injury. Commodities of this kind are graded into 1, 2, 3, 4, and 5 classes; the highest charge being made for class No. 1, which includes the more valuable commodities, while the cheapest class rate is named on class No. 5, which includes such commodities as churns, chair stock, pails, pumps, farm wagons, wheel barrows, and a hundred others of that kind. The commodity rate on lumber is and was only about one-fourth of the fifth-class rate.

In 1888, in the case of Reynolds v. Western N.Y. & Penn. Railway, 1 Interst. Com. R. 685, it was held that interstate rates on cross-ties ought not to exceed the rates on lumber. We take these remarks from the ruling in that case:

"It requires no argument to prove that the placing of railroad ties in the same category with these articles (fifth class) is neither reasonable nor just. The mere fact that it is so found is sufficient of itself to suggest that it was placed there for some purpose not readily apparent, and different from the reasons which ordinarily influence classification. * * * The ordinary conflict of interest between the railway and the shipper is here intensified by the fact that the direct interest of the carrier requires the cheapening of the shipper's product. It was candidly admitted by its general superintendent that this consideration influenced the conduct of defendant in fixing its rates upon ties at a time when its interstate rates were not subject to control under a law of Congress. But, if this was legal, then it is so no longer. It involves and implies extortion. It is not only repugnant to every man's sense of propriety and justice, but it is directly forbidden and made illegal by the third section of the act to regulate commerce, in that it subjects this particular description of traffic to undue and unreasonable prejudice and disadvantage for the pecuniary benefit of the carrier itself. It is a course of dealing, if possible, even more obnoxious to the just provisions of the act than would be a tariff arranged in the same manner for the purpose of giving a preference to another shipper competing from another direction in the same market. Rates established by a common carrier under the influence of a desire to keep upon its line material, for which the road itself has use, or to keep the price thereof low for its own advantage, cannot be justified either in morals or in law. Every party who produces such material is entitled to sell it when he wishes, in the best available market, and the common carrier has no right to prevent his doing so by disproportionate or unreasonable rates. This the defendants in the present case have been attempting to do."

In case No. 3136, Chicago Car Lumber Co. v. Louisville & Nashville, the Interstate Commerce Commission awarded reparation to the Chicago Company for overcharges in rates the railroad had collected for carrying cross-ties as of the fifth class instead of upon the lumber or commodity rate. In that case the Commission said:

"The Commission has repeatedly held that the rate on ties should not exceed the rate on lumber from which they are made."

This complaint of the Chicago Lumber Company, above referred to, was of the same nature as the Reynolds complaint, supra, and in each case awarded reparation to the claimant for the difference between the overcharges collected on cross-ties at the published, fifth-class rate, and what the charges would have been if based upon the commodity rate accorded to lumber, and made an order requiring the railroad company to establish and maintain, between the points which the shipments involved, a rate on cross-ties not in excess of the lumber rate. The Kentucky Railroad Commission in 1905, in case of Norman Lumber Co. v. L. & N. R. R. Co., ruled to the same effect. Both the state and interstate commerce commissions not only required establishment of lumber rates on cross-ties between the points named in the complaints, but severely condemned the old system of classification, and held that there was no justification for charging any more than the lumber rate on cross-ties between any points. If there was room for argument that these complaints, and the rulings of the Commission thereon were not sufficient to inform the appellant of the general policy of the Commissions with reference to such classification, and the manifest iniquity of the fifth-class rate for cross-ties, the question is certainly settled beyond controversy by the Supreme Court in the case of Mitchell Coal Co. v. Penn. R. R. Co., 230 U.S. 247, 33 S.Ct. 916, 57 L.Ed. 1472, where it was decided that, when once the Interstate Commerce Commission has condemned a rate or a practice, any other shipper may rely upon that ruling, and may bring suit without first going before the Commission. In this connection, it may be again noted that the practice of putting ties on any but the lumber rate was condemned as far back as 1888.

Until the summer of 1910, the appellant only collected for carrying cross-ties the amount of the lumber rate, although it is conceded that in its published tariff rates cross-ties were classified and listed in the fifth class, so that nominally the rate on cross-ties was from 25 to 40 cents per hundredweight, while in practice it collected but 8 or 10 cents per hundredweight, the lumber rate. Since a cross-tie weighs 200 pounds, it will be seen that application of the fifth-class rate makes the freight equal the worth of the cross-ties, and amounts to prohibition of carriage. In 1908, when appellee began business along the appellant's lines, appellant was using approximately 500,000 ties annually, and it was paying for them about 35 cents each. This price, plus the lumber freight rate to Louisville, was about 20 cents less than their Louisville market value.

The appellee, relying upon the rulings of the state and federal Commerce Commission with reference to cross-tie classification, and knowing that the appellant was not applying its published rates which had been condemned, and expecting a continuance of its practice of charging only lumber rates for cross-ties, as directed by the Commission, bought quantities of timber land, and sent its buyers in the territory served by the appellant, particularly along the line of its Owensboro and Nashville division, and began to make and purchase thousands of cross-ties.

Until the summer of 1910, the business of appellee in appellant's territory was carried on without annoyance or interference, and it was making satisfactory profits. It entered into and was filling large contracts with the Pennsylvania, Nickle Plate, and the Big Four Railroad Companies. Ties for these contracts were shipped over the Louisville & Nashville, billed to out of state destinations and at Louisville were delivered by the Louisville & Nashville to these contracting carriers. During the summer of 1910, and without any warning to the appellee, the appellant began to apply its published tariffs; that is, freight rates were charged as if ties were embraced in the fifth class. The first notice the appellee had...