Steenerson v. Great Northern Ry. Co.

• Decision Date: 20 October 1897
• Docket Number: Nos. 10,402 - (69).<SMALL><SUP>2</SUP></SMALL>,s. 10,402 - (69).<SMALL><SUP>2</SUP></SMALL&gt
• Citation: 69 Minn. 353
• Parties: ELIAS STEENERSON v. GREAT NORTHERN RAILWAY COMPANY.<SMALL><SUP>1</SUP></SMALL>
• Court: Minnesota Supreme Court

69 Minn. 353

ELIAS STEENERSON v. GREAT NORTHERN RAILWAY COMPANY.¹

Nos. 10,402 - (69).²

Supreme Court of Minnesota.

October 20, 1897.

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The plaintiff, Elias Steenerson, in 1893 filed a complaint with the Railroad and Warehouse Commission, complaining that the tariff of charges of the Great Northern Railway Company for the transportation of wheat, oats, barley and other grains from Crookston, Fisher and East Grand Forks, to the terminals Minneapolis, Duluth and St. Paul, were unjust and unreasonable, in that they were at least one-third too high, and asked that the same be reduced to and fixed at 12 cents per hundred pounds between Crookston and either of said terminals, and between other stations on said railway and said terminals in proportion, or to a just and reasonable rate. The defendant company made answer to such complaint, admitted the existence of charges as alleged in the complaint, and alleged that its rates and charges, "including those in question," were in all respects reasonable and just.

A hearing was had in the matter by the said commission, whereupon an order was made September 8, 1894, reducing and fixing the rates in the manner shown by a schedule prepared by the commission. Thereupon an appeal was taken by the Great Northern Railway Company to the district court of Ramsey county.

When the matter came on for hearing in that court, the Northern Pacific Railroad Company and its receivers petitioned to be allowed to intervene therein on the ground that the said two railroad companies are competitors in the same territory; that both have lines extending from Crookston and the other places named in said complaint to Duluth, Minneapolis and St. Paul; that the grain grown along the lines of said roads can be marketed with equal facility in the market towns on either of said roads, and especially so upon the parallel lines running north from Winnipeg Junction, Fargo and Glyndon; that if the rates then in force upon the Great Northern Railway be reduced, "the grain can be hauled by the farmers and marketed on its line instead of upon the lines of the Northern Pacific railroad, and thereby the Northern Pacific Railroad Company and its receivers will be greatly damaged and injured in its business and occupation of common carrier, and thereby lose a large amount of freight which would otherwise be carried on the line of intervenors' road." Intervenors further alleged that the rates thus existing upon the said two roads between the said points for the said commodities were the same; and, furthermore, that the affairs of the said Northern Pacific Company were in the hands of receivers, and certain mortgages upon the properties were being foreclosed, "because of the inability of said company, on account of loss and failure of earnings of its said line and system of railroads, to meet and pay the interest on the said mortgages as the same has accrued."

Notwithstanding the objections of the plaintiff the court permitted the Northern Pacific Company to intervene and to introduce testimony in support of the allegations of its complaint in intervention.

On September 28, 1895, the court, Charles D. Kerr, J., filed its order reversing the order of the commission. A motion for a new trial was duly made in behalf of the commission and of the state, which was argued before Willis, J., on account of the illness of Judge Kerr, and from the order denying this motion, Elias Steenerson, the state of Minnesota, and the Railroad and Warehouse Commission appealed. Reversed.

H. W. Childs, Attorney General, and Clapp & Macartney, for appellants.

M. D. Grover, for Great Northern Railway Company.

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C. W. Bunn and Frank B. Kellogg, for Northern Pacific Railroad Company.

C. W. Bunn, for Northern Pacific Railroad Company.

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CANTY, J.

1. Chapter 10, Laws 1887, as amended by chapter 106, Laws 1891, provides that in fixing rates of transportation the state railroad and warehouse commission may act upon the complaint "of any person, firm, corporation or association, or any mercantile, agricultural or manufacturing society, or any body politic or municipal organization." It further provides:

"If the tariff of rates, fares, charges and classifications so complained of shall be found by the evidence to be unequal or unreasonable, the commission shall state wherein they are unequal or unreasonable, and shall make a tariff of rates, fares, charges and classifications which shall be substituted for the tariff complained of."³

Steenerson appeared before the commission, alleged that he was engaged in shipping grain over the railroad of the Great Northern Railway Company from the stations of Crookston, Fisher, and East Grand Forks to Minneapolis and Duluth, in this state, and that the rates between these points were too high. After summoning the railway company and having a hearing as provided by the statute, the commission made an order reducing rates on grain on all the lines of the railway company within the state. From this order the railway company appealed to the district court, and after a hearing on the appeal the court reversed the order of the commission. From the order of the court the attorney general appeals to this court.

It is contended by counsel for the railway company that under the statute the commission had no authority to go beyond the relief asked for in the complaint, or to reduce rates between points not named in the complaint. We cannot agree with counsel. It is the duty of the commission, when reducing rates as prayed for in such a complaint, to see that its acts do not result in discrimination as against other points on the line or system not named in the complaint. The statute which makes it the duty of the commission to prevent discrimination, when complained of, clearly intends that the commission shall not itself create such discrimination. And, in order to avoid doing so when reducing the rates complained of, it may be necessary to reduce rates between all other points on the line or system. The complaint made in such a case is not at all analogous to the bringing of an action by a private suitor to redress a private grievance. The complainant before the commission need have no direct or immediate interest in the matter, and, even if he has, he is acting on behalf of himself and the rest of the public.

2. Of the lines of railroad here in question, 561 miles were built for and owned by other railroad companies prior to the foreclosure sales of 1879. At one of these sales the promoters of the St. Paul, Minneapolis & Manitoba Railway Company bid off a part of the property; and the company itself, after it was organized, bid in the rest of said property. These properties, the franchise connected with the same, and a large land grant, earned and to be earned, were bid off for the aggregate sum of $3,600,000, subject to a prior lien of $486,000. The promoters transferred to the new company the part bid in by them, and the properties were immediately bonded by the new company for $16,000,000, and it issued to the promoters its stock to the amount of $15,000,000. It operated its railroads from 1879 to 1890, during which time it increased its mileage in Minnesota from 561 miles to nearly the present amount of 1,381 miles of main track. It also extended its lines beyond the state into North and South Dakota, and beyond to the Pacific coast. Its stock was subsequently increased to $20,000,000, and its bonded indebtedness now outstanding is $84,558,484. It leased all of its lines to the Great Northern Railway Company for 999 years. By the terms of the lease, which took effect February 1, 1890, the Great Northern Railway Company guarantied the payment of the principal and interest of said bonds, and guarantied a dividend of 6 per cent. per annum on said $20,000,000 of stock.

At the foreclosure sales of 1879 the 561 miles of main track then built were sold for a small part of their original cost, and a small part of what it would then cost to reproduce them, saying nothing of the large quantity of valuable lands included in the sale. The attorney general contends that the price at which the property sold at foreclosure sale must, as far as it goes, be taken as the basis for determining in this case what is a reasonable income to be derived from the operation of these lines of railroad. On the other hand, counsel for the railway company contend that the amount of the present fixed charges of the Great Northern Railway Company is the controlling consideration in determining what is a reasonable income to be derived from operating the lines so leased by it.

In our opinion, both positions are wholly untenable. If the Manitoba Company and its promoters bought the properties at the foreclosure sales at a great sacrifice, that is their good fortune. If the leasing of the system by the Great Northern Railway Company turns out to be a bad bargain, that is its misfortune. The patrons of the road should not gain by the one transaction or lose by the other. There is as much reason why the public should bear the loss of the bad bargain as there is why it should take the profits of the good bargain. To adopt any such principle would leave the public at the mercy of every railroad manipulator, and offer a premium on all kinds of schemes for increasing the fixed charges of railroads.

Again, in determining what are reasonable rates, it is perfectly immaterial whether the railroad is mortgaged for two or three times what it would cost to reproduce it, or whether it is free from incumbrance. To hold otherwise would be to hold that the state or the public have indirectly guarantied the payment of the mortgage bonds of every railroad....