State of Texas v. Anderson, Clayton & Co.

• Decision Date: 29 September 1937
• Docket Number: No. 8227.,8227.
• Parties: STATE OF TEXAS v. ANDERSON, CLAYTON & CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

92 F.2d 104 (1937)

STATE OF TEXAS v. ANDERSON, CLAYTON & CO. et al.^*

No. 8227.

Circuit Court of Appeals, Fifth Circuit.

September 4, 1937.

Rehearing Denied September 29, 1937.

Wm. McCraw and Wm. Madden Hill, both of Austin, Tex., and A. L. Reed, of Dallas, Tex., for the State of Texas.

John H. Crooker and Carl G. Stearns, both of Houston, Tex., and J. H. Barwise and Fred L. Wallace, both of Fort Worth, Tex., for appellees.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

FOSTER, Circuit Judge.

Appellee, Anderson, Clayton & Co., an unincorporated joint-stock association, brought this suit, on behalf of itself and all others similarly situated, against the Wichita Valley Railway Company, Fort Worth & Denver City Railway Company, and Burlington-Rock Island Railroad Company, alleging jurisdiction under section 24(8), Judicial Code (28 U.S.C.A. § 41(8), as a suit arising under the interstate commerce laws, and under the provisions of the Declaratory Judgment Act, Act March 3, 1911, as amended (28 U.S.C.A. § 400).

The case as shown by the pleadings and proof is this. Anderson, Clayton & Co., hereafter referred to as plaintiff, is a dealer in raw cotton, doing a large business, with headquarters at Houston, Tex. Plaintiff buys cotton intended for export or shipment to states other than Texas, in bales, in small lots, at interior points in Texas, and assembles it in carload lots at various shipping points along the lines of defendants. Carload rates vary and are based on capacities of 25,000, 50,000 and 75,000 pounds, approximately 50, 100, and 150 bales. It is then transported to Houston by these carriers. The railroad agents are notified that the cotton is intended for export or interstate shipment, and it moves on through bills of lading, appropriately marked to so indicate.

In the usual course of business, cotton is purchased by plaintiff through its own representative or over the telephone from the main office. A written confirmation is immediately sent the seller, setting out the conditions of the purchase. Shipping instructions are given the seller, and he delivers the cotton to the railroad and usually receives a bill of lading "to shipper's order, notify Anderson, Clayton & Co." The seller indorses the bill of lading over to plaintiff, draws a draft on plaintiff for the price, and negotiates the draft with a local bank. The draft is paid by plaintiff on presentation. Insurance on the cotton in favor of plaintiff attaches as soon as the bill of lading is indorsed.

At Houston the cotton is weighed, sampled, classed, and, according to grade, is appropriated, with other similar cotton, to orders in hand, for shipment to foreign countries or states other than Texas or for replacement of their own stocks of spot cotton at such points of destination. Sales for export are usually round lots of 50 or 100 bales. The cotton is compressed to high density, if that has not already been done, and then moves to its ultimate destination by ocean carrier, sometimes the same day it is received, but the average delay is seven to eight days.

From a typical transaction set out in the bill the following appears: For the purpose of filling contracts previously executed, a lot of thirty bales of cotton was purchased on September 28, 1935, from the Rochester Gin Company of Rochester, Tex., who delivered it to the Wichita Valley Railway Company at Weinert, Tex., for transportation to Houston. The railroad issued a through export bill of lading to the Gin Company. The Wichita Valley Railway transported the cotton to Wichita Falls, Tex., and delivered it to the Houston Compress Company. The cotton was compressed and consolidated with other cotton into a carload lot. It was transported from Wichita Falls by the Fort Worth & Denver City Railway Company to Teague, Tex., where it was delivered to the Burlington-Rock Island Railroad Company, and was by it transported to Houston, where it arrived on October 12, 1935. At Houston the cotton was discharged in the warehouse of the Houston Compress Company, where it was graded, sampled, and assembled with sufficient other bales of cotton of uniform grade and quality to fill orders for export. The cotton was appropriated to seven different contracts in the proportions of one to eighteen bales. Twenty-nine bales were shipped to Japan on three vessels, and one bale was shipped to England on a different vessel. Deliveries were made to the vessels on October 12, 17, 18, 25, and 29 and November 5, 1935. The local consumption of raw cotton at Texas ports is negligible. The method used by plaintiff in buying, selling, and shipping cotton for export is general in the trade.

Defendants and other railroads have entered into a joint agreement under which through rates are provided and a tariff covering these rates, designated as Texas-Louisiana Lines' Tariff No. 71-C, I. C. C. No. 382, has been filed with and approved by the Interstate Commerce Commission. The tariff applies to both interstate and intrastate commerce with certain exceptions. A rule of the Texas Railroad Commission requires that cotton moving from interior points must be compressed for shipment at the nearest compress to the point of origin in either direction. Tariff No. 71-C, I. C. C. No. 382, recognizes this rule, but item No. 280 contains the following exception: "Exceptions applicable only on interstate traffic. Exception 2. — The F. W. & D. C.-W. V. will permit shippers to compress and consolidate shipments of cotton at compress points (other than the first) on said lines when in direct line of transit. * * *" The exception applies to all the defendant railroads as connecting carriers. The through rate was applied to certain shipments to plaintiffs, set out in the bill, and they were permitted to compress the cotton at presses in direct line between the point of shipment and Houston, regardless of whether they were the nearest to point of origin.

A hearing was provoked before...