Railroad Commission of Texas v. Eastern Texas Co State of Texas v. Same

Decision Date18 February 1924
Docket Number146,Nos. 145,s. 145
Citation68 L.Ed. 569,44 S.Ct. 247,264 U.S. 79
PartiesRAILROAD COMMISSION OF TEXAS et al. v. EASTERN TEXAS R. CO. et al. STATE OF TEXAS v. SAME
CourtU.S. Supreme Court

Messrs. W. A. Keeling, of Mexia, Tex., and T. W. Gregory, of Washington, D. C., for appellants.

[Syllabus and Argument of Counsel from pages 80-81 intentionally omitted] Messrs. John R. Turney and Daniel Upthegrove, both of St. Louis, Mo., and E. B. Perkins, of Dallas, Tex., for appellees.

Mr. Justice VAN DEVANTER delivered the opinion of the Court.

These two suits involve the right of the Eastern Texas Railroad Company, a Texas corporation having a railroad in that state, to dismantle and abandon its road. One was brought by the company to prevent threatened interference by the state's officers; the other by the state to prevent intended dismantling and abandonment by the company. The former was begun in the District Court; the latter was removed into that court from a state court. The company prevailed (283 Fed. 584), and the state and its officers prosecute these direct appeals.

The road is 30.3 miles long and all in Texas. The company constructed it in 1902, operated it continuously until April 30, 1921, and then discontinued its operation because it had proved a losing venture. The traffic over it during the period of operation was in greater part interstate and foreign commerce and in lesser part intrastate commerce. The withdrawal from interstate and foreign commerce had the sanction of the Interstate Commerce Commission, given under a law of Congress, and was sustained by this court in Texas v. Eastern Texas R. R. Co., 258 U. S. 204, 42 Sup. Ct. 281, 66 L. Ed. 566. The present controversy relates to the withdrawal from intrastate commence and the intended dismantling and abandonment of the road.

The road was constructed primarily to carry traffic to and from large lumbering industries in that territory; but in the course of time those industries exhausted the adjacent supply of timber, and in 1917 they were permanently closed and the people who had been employed in them moved away. The traffic over the road then fell off so much that the revenue became pronouncedly less than the cost of operation. But the operation was continued until the company had exhausted its surplus accumulated in prior years, had come to be without cash or credit, and was unable to go on. Its only remaining property consisted of the road and some meager equipment; and these had shrunken in value from $450,000 to $50,000—the latter being the estimated salvage value less the cost of dismantling. The property was offered for sale at $50,000 to any one who would operate the road, and the offer was widely advertised, but without eliciting any acceptance or bid. Essential repairs would cost $185,000. The operating cost would be as much as $84,000 per year; the possible revenue from all traffic would not exceed $50,000, and that from intrastate traffic would not be more than $20,000. The adjacent country was sparsely populated; the soil had proved to be usually unproductive; there were no local industries, and the general situation precluded any reasonable expectation that the road would become self-sustaining in the future. In these circumstances the company concluded to cease all operation and to dismantle and abandon the road.

The company was incorporated under a general law of the state in 1900 for a term of 25 years, and when it ceased operating the road 4 1/2 years of that term remained. It had not received any state land grant or other public aid; nor had it acquired any property through an exercise of the power of eminent domain, although that power was available under the law of the state.

In the District Court, the state and its officers took the position that under the state statutes the company was prohibited from dismantling or abandoning its road, and was in duty bound, and could be compelled, to operate the same in intrastate commerce for the remainder of the 25-year term. In this court they have adhered to that position, with the qualification that, in the circumstances shown, the company may not be compelled to operate the road, but may be made to respond in damages to the state for a failure to operate it. The company, on the other hand, has contended throughout that the state statutes neither prohibit the dismantling and abandonment of the road nor lay on the company a duty to operate it when that can be done only at a loss, and that, if the statutes be as insisted on the other side, they deprive the company of property without due process of law and in that respect are in conflict with the Fourteenth Amendment to the Constitution of the United States.

The appellants rely on two statutory provisions, which they insist were in force when the company was incorporated and became a part of the charter contract. Before examining these provisions, it is well to advert to principles which would govern in their absence, and also to considerations bearing on their office and effect.

The usual permissive charter of a railroad company does not give rise to any obligation on the part of the company to operate its road at a loss. No contract that it will do so can be elicited from the acceptance of the charter or from putting the road in operation. The company, although devoting its property to the use of the public, does not do so irrevocably or absolutely, but on condition that the public shall supply sufficient traffic on a resonable rate basis to yield a fair return. And if at any time it develops with reasonable certainty that future operation must be at a loss, the company may discontinue operation and get what it can out of the property by dismantling the road. To compel it to go on at a loss or to give up the salvage value would be to take its property without the just compensation which is a part of due process of law. The controlling principle is the same that is applied in the many cases in which the constitutionality of a rate is held to depend upon whether it yields a fair return. Brooks-Scanlon Co. v. Railroad Commission of Louisiana, 251 U. S. 396, 399, 40 Sup. Ct. 183, 64 L. Ed. 323; Bullock v. Railroad Commission of Florida, 254 U. S. 513, 520, 41 Sup. Ct. 193, 65 L. Ed. 380; State ex rel. v. Jack (C. C.) 113 Fed. 823; Id., 145 Fed. 281, 76 C. C. A. 165; State v. Old Colony Trust Co., 215 Fed. 307, 312, 131 C. C. A. 581, L. R. A. 1915A, 549; Northern Pacific R. R. Co. v. Dustin, 142 U. S. 492, 499, 12 Sup. Ct. 283, 35 L. Ed. 1092; Commonmonwealth v. Fitchburg R. R. Co., 12 Gray (Mass.) 180, 190; State v. Dodge City, etc., Ry. Co., 53 Kan. 329, 336, 36 Pac. 755, 24 L. R. A. 564.

So long as the railroad company 'continues to exercise' the privileges conferred by its charter, the state has power to regulate its operations in the interest of the public, and to that end may require it to provide reasonably safe and adequate facilities for serving the public, even though compliance be attended by some pecuniary disadvantage. Atlantic Coast Line R. R. Co. v. North Carolina Railroad Commission, 206 U. S. 1, 26, 27 Sup. Ct. 585, 51 L. Ed. 933, 11 Ann. Cas. 398; Missouri Pacific Ry. Co. v. Kansas, 216 U. S. 262, 279, 30 Sup. Ct. 330, 54 L. Ed. 472; Chesapeake & Ohio Ry. Co. v. Public Service Commission, 242 U. S. 603, 607, 37 Sup. Ct. 234, 61 L. Ed. 520. But this rule in no wise militates against the principle that the company may withdraw its property from use by the public 'when that use can be kept up only at a loss.' Brooks-Scanlon Co. v. Railroad Commission of Louisiana, supra.

A state often has many laws relating to railroads on its statute books which do not become a part of the charter contract which are of such a nature that it is apparent the...

To continue reading

Request your trial
85 cases
  • Atlantic Coast Line R. Co. v. Public Service Commission, Civ. No. 1879.
    • United States
    • United States District Courts. 4th Circuit. United States District Court of South Carolina
    • May 10, 1948
    ...a railroad may not constitutionally be compelled to operate its system as a whole at a loss, Railroad Commission of Texas v. Eastern Tex. R. Co., 264 U.S. 79, 44 S.Ct. 247, 68 L.Ed. 569, yet it may not seek to retain its franchise and at the same time avoid its contractual obligation to pro......
  • Quanta Resources Corp., Matter of, 83-5142
    • United States
    • United States Courts of Appeals. United States Court of Appeals (3rd Circuit)
    • August 16, 1984
    ...to operate a business, no matter how vital to the public interest, at a loss. See Railroad Commission of Texas v. Eastern Texas Railroad Company, 264 U.S. 79, 85-86, 44 S.Ct. 247, 248-49, 68 L.Ed. 569 (1924); Brooks-Scanlon Co. v. Railroad Commission of Louisiana, 251 U.S. 396, 399, 40 S.Ct......
  • Interstate Commerce Commission v. Nav Co
    • United States
    • United States Supreme Court
    • January 9, 1933
    ...203 S.W. 199, L.R.A. 1918E, 315; State v. Public Service Comm., 287 Mo. 522, 229 S.W. 782. Compare Railroad Commission v. Eastern Texas R. Co., 264 U.S. 79, 85, 44 S.Ct. 247, 68 L.Ed. 569. 27 Of the four major recommendations made by the Commission in its annual report of December, 1918, th......
  • Coolidge v. Long 1930
    • United States
    • United States Supreme Court
    • February 24, 1931
    ...is necessary in order that this court may properly enforce these provisions of the Constitution. Railroad Commission v. Eastern Texas R. R., 264 U. S. 79, 86, 44 S. Ct. 247, 68 L. Ed. 569, and cases By the deed of each grantor one-fifth of the remainder was immediately vested in each of the......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT