State v. Central of Georgia Ry. Co.

• Decision Date: 31 January 1900
• Parties: STATE v. CENTRAL OF GEORGIA RY. CO. et al.
• Court: Georgia Supreme Court

35 S.E. 37

109 Ga. 716

STATE v. CENTRAL OF GEORGIA RY. CO. et al.

Supreme Court of Georgia

January 31, 1900

Syllabus by the Court.

1. The competition, the defeating or lessening of which paragraph 4 § 2, art. 4, of the constitution (Civ. Code, § 5800), so far as applicable to railroad companies, was designed to prevent was competition between lines of railroad, viewed with reference to their general business in and through the territory traversed by them, and not competition which might incidentally exist at mere points or particular places. A combination of railroad lines, whatever the form adopted for bringing it about, is not violative of this paragraph of the constitution, even though it might lessen or defeat competition at some point or points, if, as a general result of the combination, the public at large, as distinguished from the people of special or particular communities, was in consequence benefited.

2. Whether or not the combination of any two given lines of railroad would be contrary to this paragraph of the constitution is a question which cannot be settled under any rule of universal application, but one which must be determined in each case upon its own peculiar facts and circumstances.

3. The present record discloses that there was ample evidence to uphold an adjudication that the consolidation of the two lines of railroad involved did not defeat, and was not intended to defeat, competition, in the sense in which that word is used in the above-mentioned paragraph of the constitution, and also that such consolidation neither encouraged nor tended to encourage monopoly.

Error from superior court, Putnam county; John C. Hart, Judge.

Action by the state against the Central of Georgia Railway Company and other railroad companies to set aside a contract of sale of the latter company to the former, as tending to stifle competition and create a monopoly. From a judgment in favor of defendants, the state brings error. Affirmed.

J. M Terrell, Atty. Gen., J. S. Turner, W. H. Burwell, and S. T. Wingfield, for the State.

Lawton & Cunningham, Thos. G. Lawson, J. R. Lamar, and H. A. Jenkins, for defendants in error.

LEWIS J.

This suit was brought in Putnam superior court, by and in the name of the state of Georgia, against the Central of Georgia Railway Company, the Middle Georgia & Atlantic Railway Company, and the Eatonton Branch Railroad. It was founded upon an executive order which was issued in the early part of the year 1899 upon a petition filed by certain citizens of Putnam county with the governor; the main purpose of the petition being to procure an executive order directing the attorney general to institute suit in the name of the state to set aside a certain contract of sale, under which the two last-named roads were purchased by the Central of Georgia Railway Company on the 31st of December, 1896, upon the ground that this contract of sale was in violation of article 4, § 2, par. 4, of the constitution of this state. In the petition it was substantially alleged that these two companies (the Middle Georgia and the Central) were competing lines, and the effect of this purchase by the Central was to destroy competition, and to create a monopoly in the business formerly enjoyed by both corporations. It was especially charged that there was great competition between the two companies at Milledgeville and at Machen; and several points were designated in the petition, along the Middle Georgia & Atlantic Railway, where it was alleged that the result of the contract of purchase by the Central was to defeat competition at such places, and created in most of them a monopoly in the Central. The Central, through its counsel, filed an answer to the petition, specifically denying its allegation that the purchase of the Middle Georgia was designed, or had any tendency whatever, to defeat or lessen competition or to produce monopoly, within the meaning of the constitution; alleging that the two roads were never rivals or competitors, in the sense contemplated by the constitution, and that the effect of the contract of purchase was really of vast benefit to the public interests, the same having resulted in the reduction of passenger and freight rates, in the better equipment of the road, and in superior accommodations to its patrons and the public generally. This case came on to be heard before his honor, Judge Hart, at chambers, on September 11, 1899, upon the prayer of the petition that the holding and operation of the Eatonton Branch and the Middle Georgia by the Central directly or indirectly be enjoined, and that until the final hearing of the case a restraining order be granted, prohibiting the further operation of these two railroads by the Central, and that a receiver be appointed to take charge of the two roads and all the corporate property belonging to them, and to hold, operate, and manage the same under the direction of the court, in order that competition may be preserved and the public interests protected until the two roads are operated by their respective corporations as separate properties. On the 18th of September, after hearing argument of counsel, the judge below, having held up his decision until that date, passed an order refusing the injunction and receiver as prayed for, to which plaintiff in error excepted, and assigns the same as error in its bill of exceptions.

In 1889 what was known as the Eatonton & Machen Railroad Company was incorporated by an act of the legislature, with authority to build and operate a line of railway from Eatonton to Machen, and to extend the same in either direction to Savannah and Atlanta. See Acts 1889, p. 227. At the same session of the legislature (see page 281) the name of the corporation was changed to the Middle Georgia & Atlantic Railway Company. During the year 1890 this line had been completed between the towns of Eatonton and Machen, and had been graded north of Machen nearly to Covington. In 1893 the road had been completed to Covington, and was being operated from Eatonton to that point. In 1893 there were in Eatonton two separate and independent lines of railway, namely, the Middle Georgia and the Central; the latter, through its receiver, operating the Eatonton Branch under a lease made many years previous. It appears from the record that the line from Eatonton to Milledgeville, know as the Eatonton Branch Railroad, was completed about the year 1852, and this branch has never been under any separate or independent operation; but upon its completion the Central Railroad & Banking Company of Georgia leased the same, and it went into the hands of the receiver of the Central, by whom it was operated until October, 1893, when, under an order of the United States circuit court this branch railroad was allowed to withdraw, and did withdraw, its line from the control of the receiver, upon the showing made to the court by the receiver that this branch was not earning its operating expenses and annual rental. Upon assuming control of its road, the Eatonton Branch Railroad immediately entered into contract with the Middle Georgia & Atlantic, by which the latter corporation was to operate its line temporarily; the net proceeds to be divided between the two corporations on a mileage basis. The Middle Georgia & Atlantic then began to run its trains from Milledgeville to Covington. On the 1st day of June, 1896, the Middle Georgia & Atlantic purchased by deed of conveyance the railroad and corporate franchises of the Eatonton Branch, and then became the owner of the line from Milledgeville to Covington, until it sold out its road and franchises to the Central of Georgia on December 31, 1896. The affairs of the Central Railroad & Banking Company became liquidated under the receivership, and a reorganization perfected, by which all the property and franchises of that corporation passed into the custody and control of the new corporation, the Central of Georgia Railway Company. It owned and operated a line of railway from the city of Atlanta to the city of Savannah, via Macon, and from Gordon, in Wilkinson county, to Milledgeville, in the county of Baldwin, besides other lines.

1, 2. The suit in this case, and the relief therein sought, is based upon the following provision in the state constitution embodied in section 5800 of the Civil Code: "The general assembly of this state shall have no power to authorize any corporation to buy shares or stock in any other corporation in this state or elsewhere, or to make any contract, or agreement whatever, with any such corporation, which may have the effect, or be intended to have the effect, to defeat or lessen competition in their respective businesses, or to encourage monopoly; and all such contracts and agreements shall be illegal and void." The case necessarily involves the vital question as to what is a proper construction to be placed upon this language in the constitution. Did the convention, in framing that instrument, intend to enact any new law or declare any new principle in connection with contracts touching the defeat or lessening of competition, or the production or encouragement of monopoly? If so, what is that new principle? Can it be gathered from the words employed as to what sort of competition or monopoly is meant? We are left absolutely in the dark, so far as provisions in the constitution are concerned, as no language whatever is used therein to throw any light on, or give explanation touching, the matter. We are not, however, in absolute darkness as to the general principles of law that have been in existence from time almost immemorial touching contracts of this nature; that is, principles relating to the protection of the people against contracts preventing competition or creating monopolies. The...