Public Service Commission v. Union Pac. R. Co.

Citation271 Mo. 258,197 S.W. 39
Decision Date30 June 1917
Docket NumberNo. 20062.,20062.
PartiesPUBLIC SERVICE COMMISSION v. UNION PAC. R. CO.
CourtUnited States State Supreme Court of Missouri

Appeal from Circuit Court, Jackson County; T. J. Seehorn, Judge.

Action by the Public Service Commission of the State of Missouri against the Union Pacific Railroad Company, a corporation. From a judgment for defendant, plaintiff appeals. Affirmed.

A. Z. Patterson and James D. Lindsay, both of Jefferson City, for appellant. Henry W. Clark, N. H. Loomis, of Omaha, Neb., R. W. Blair, of Topeka, Kan., and I. N. Watson, of Kansas City, Mo., for respondent.

BOND, J.

I. The Public Service Commission seeks by this action to enjoin the Union Pacific Railroad Company from making a proposed issue of bonds to cover its expenditures for rolling stock and other improvements and betterments, without first applying to it for authority. The Union Pacific is one of the largest railroad systems in the United States. It was incorporated under the laws of the state of Utah, and now owns and operates 3,500 miles of railroad, which traverses seven states from its western terminus at Ogden, Utah, to its eastern terminus at Kansas City, Mo. The book value of the company's holdings and property is about $300,000,000, of which only $3,000,000 is located in Missouri. Its Missouri property consists of rights of way and land acquired by purchase for terminal purposes and warehouses for the handling and storage of freight, together with its main track, which extends into the state only half a mile, and certain spur or switch tracks maintained for the accommodation of private shippers and industrial plants, its total trackage in Missouri being only about 1,000 feet. In 1908 the company executed its first lien and refunding mortgage on its entire system to secure an issue of $200,000,000 4 per cent. bonds. This mortgage was duly recorded in the recorder's office of Jackson county, Mo., prior to the enactment of the Public Service Commission Law, and only $65,902,000 of bonds were issued thereunder, the balance being reserved for future issue to cover expenditures to be made from time to time for construction of new track, rolling stock, improvements, and betterments. Having expended over $2,000,000 for equipment and improvements, in 1914 the company applied to the trustee under the original mortgage for the issuance of $2,250,000 additional of reserved bonds by way of reimbursement, and, the bonds having been authenticated and delivered to the company, they are now in its treasury available for sale. The Commission contends the Union Pacific Company is subject to the provisions of the Public Service Commission Act of the state of Missouri, which took effect April 15, 1913, and that before consummating the sale and delivery of such bonds, it must secure permission to do so from the Commission. The respondent railroad contends that the act does not apply to railroad corporations incorporated under the laws of another state, enjoying no franchise from the state of Missouri, and engaged therein exclusively in interstate commerce; that the application of the provisions of the act to defendant company would impose a direct burden upon interstate commerce and property and business outside the state. The pertinent portions of the Public Service Commission Act will be stated in the opinion. On the allegations of the petition and answer both parties moved for judgment. The court sustained the motion of defendant, whereupon the plaintiff appealed to this court.

II. That the Legislatures of the several states may delegate to administrative bodies any power which is not "strictly and exclusively legislative" (Chief Justice Marshall) is an evolution of the law wrought by the logic of events and now firmly established. We have moved beyond the overrestrictive ancient rulings, and now accord to lawmaking bodies full power, within the Constitution, to make use of any special agency necessary to effective action. In many states this is secured by adequate constitutional amendments. In others, lacking that facility, the organic law has received constructions narrowing its limitations to the strict letter of the chart. In the solution of the reciprocal rights of the public and the great carriers and utility corporations, the Legislature cannot, in many cases, do justice to both, since its Constitution and term of office disables it to make the investigation essential to that end. In such cases, to act with wisdom, fairness, and promptness, it must have expert and informative findings beyond the scope of any direct inquiry by the Legislature itself. Hence the necessity of employing special administrative bodies "charged with the solution of a problem demanding expert treatment" and having "no functions outside the field offered by this problem." This is the primal principle in the nature of the commissions created by the states. The Interstate Commerce Commission is a wholly different body, and possesses larger powers as the delegatory of Congress, which in itself and through such agency, possesses plenary power "to regulate commerce." U. S. Const. art. 1, § 8, subsec. 3; Railroad v. Interstate Com. Com., 234 U. S. loc. cit. 355 et seq., 34 Sup. Ct. 833, 58 L. Ed. 1341. The primal purpose to provide a corps of capable investigators, and the requirement that their resultant finding shall be lawful and reasonable, are not without interpretative aid if borne in mind in the consideration of the statutes defining the power of public commissions. The ones involved in this appeal are, viz. sections 54, 55, 57 Pub. Serv. Act 1913. Section 54 is, to wit:

"Right to Issue Stocks, Bonds and Notes is Subject to Regulation by State. — The power of railroad corporations, street railroad corporations and common carriers to issue stocks, and bonds, notes, and other evidences of indebtedness and to create liens upon their property situated in this state is a special privilege, the right of supervision, regulation, restriction, and control of which is and shall continue to be vested in the state, and such power shall be exercised as provided by law and under such rules and regulations as the Commission may prescribe." Laws 1913, p. 592.

Section 55 is, to wit:

"Transfer of Franchises or Stocks. — No railroad corporation, street railroad corporation or common carrier shall hereafter sell, lease, assign, transfer, mortgage or otherwise dispose of or incumber the whole or any part of its railroad or street railroad necessary or useful in the performance of its duties to the public, or any franchise or permit or any right thereunder, nor by any means whatsoever, direct or indirect, merge or consolidate such railroad or street railroad, franchise or permit, or any part thereof, with any other corporation, person or public utility, without having first secured from the Commission an order authorizing it so to do. Every such sale, assignment, lease, transfer, mortgage, disposition, incumbrance, merger or consolidation made other than in accordance with the order of the Commission authorizing the same shall be void. The permission and approval of the Commission to the exercise of a franchise or permit under this act, or the sale, assignment, lease, transfer, mortgage or other disposition or incumbrance of a franchise or permit under this section, shall not be construed to revive or validate any lapsed or invalid franchise or permit, or to enlarge or add to the powers or privileges contained in the grant of any franchise or permit, or to waive any forfeiture. Nothing in this subsection contained shall be construed to prevent the sale, lease or other disposition by any corporation, person or public utility of a class designated in this subsection of property which is not necessary or useful in the performance of its duties to the public, and any sale of its property by such corporation, person or public utility shall be conclusively presumed to have been of property which is not useful or necessary in the performance of its duties to the public, as to any purchaser of such property in good faith for value." Laws 1913. pp. 592, 593.

Section 57, as far as relied upon by appellant is, to wit:

"Approval of Issues of Stocks, Bonds and Other Forms of Indebtedness. — A common carrier, railroad corporation or street railroad corporation organized or existing, or hereafter incorporated, under or by virtue of the laws of the state of Missouri, may issue stocks, bonds, notes or other evidences of indebtedness payable at periods of more than twelve months after the date thereof, when necessary for the acquisition of property, the construction, completion, extension or improvement of its facilities, or for the improvement or maintenance of its service or for the discharge or lawful refunding of its obligations or for the reimbursement of moneys actually expended from income." Laws 1913, p. 594.

II. The first question presented is the applicability of any of the above sections to the respondent railroad under the facts shown by its answer, leaving out of view for that discussion any question of the validity...

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