Terre Haute Indianapolis Railroad Company v. State of Indiana William Ketcham

• Citation: 48 L.Ed. 1124,24 S.Ct. 767,194 U.S. 579
• Decision Date: 31 May 1904
• Docket Number: No. 264,264
• Parties: TERRE HAUTE & INDIANAPOLIS RAILROAD COMPANY , Plff. in Err., v. STATE OF INDIANA ex rel. WILLIAM A. KETCHAM, Attorney general
• Court: U.S. Supreme Court

194 U.S. 579

24 S.Ct. 767

48 L.Ed. 1124

TERRE HAUTE & INDIANAPOLIS RAILROAD COMPANY , Plff. in Err.,

v STATE OF INDIANA ex rel. WILLIAM A. KETCHAM, Attorney general.

No. 264.

Argued April 29, May 2, 1904.

Decided May 31, 1904.

Messrs. Lawrence Maxwell, Jr., John G. Williams, and Samuel O. Pickens for plaintiff in error.

[Argument of Counsel from Pages 580-582 intentionally omitted] Messrs.Robert S. Taylor, William A. Ketcham Roscoe O. Hawkins, and Ferdinand Winter for defendant in error.

[Argument of Counsel from pages 583-585 intentionally omitted] Mr. Justice Holmes delivered the opinion of the court:

This is a suit brought by the state of Indiana to ascertain and to recover from the plaintiff in error the total net profits made by the latter over 15 per cent on the true cost of construction of its railroad, from the time when the net earnings equalled that cost, with 10 per cent on the same added. The claim of the state was made under § 23 of the charter of the railroad, approved January 26, 1847, and four acts of 1897, to be referred to. The complaint admits, and the answer sets up, a surrender on January 17, 1873, of the charter of 1847, on which the supposed obligation was based, and an acceptance of the general railroad law by the company, and also a judgment for the company in March, 1876, on a former complaint for the same cause. The answer also makes a general denial, and invokes the 14th Amendment and other relevant parts of the Constitution of the United States. The case was referred to a master, who ruled that the former judgment was not a bar, but ruled also that the company was not liable. The superior court ruled the other way, and gave judgment against the company for $913,905.01. This judgment was affirmed by the supreme court of the state, and the case then was brought here by writ of error.

By § 22 of the charter the railroad is given absolute discretion in the fixing of charges. Then, by § 23: 'When the aggregate amount of dividends declared shall amount to the full sum invested and 10 per centum per annum thereon, the legislature may so regulate the tolls and freights that not more than 15 per centum per annum shall be divided on the capital employed, and the surplus profits, if any, after paying the expenses and receiving [reserving] such proportion as may be necessary for future contingencies, shall be paid over to the treasurer of state, for the use of common schools; but the cor- poration shall not be compelled by law to reduce the tolls and freights so that a dividend of 15 per centum per annum cannot be made; and it shall be the duty of the corporation to furnish the legislature, if required, with a correct statement of the amount of expenditures and the amount of profits, after deducting all expenses,' etc., By § 24: Semiannual dividends of so much of the profits as the corporation may deem expedient are to be made, and 'the directors may retain such proportion of the profits as a contingent fund to meet subsequent expenses as they shall deem proper.' By § 35, repealed in 1848, the corporation is to keep a fair record of the whole expense of making and repairing its tolls received, and the state is to have the right to purchase the stock of the company after twenty-five years for a sum equal, with the tolls received, to the cost and expenses of the railroad, with 10 per cent.

The complaint relied also upon an amendment of § 23, on February 24, 1897, attempting to make the above-mentioned surplus profits a debt, and to make the company accountable from the beginning of such profits. The complaint still further relied upon an act of January 27, 1897, requiring the railroad to account; as act of March 4, 1897, appropriating the net earnings of the company above 15 per cent, etc., as above, to the use of common schools, and authorizing a demand and a suit; and an amendment of the general railroad law on February 18, 1897, after the surrender of this company's charter, providing that all liabilities to the state, whether inchoate or complete, under special charter, were and should be reserved, notwithstanding the past or future acceptance of the surrender of such special charters.

The supreme court, while agreeing that the right of the state must depend on the original charter, did give force to this later legislation, in terms, as providing a remedy, and, on the construction which we are compelled to give to the charter, did also give force in fact to the amendment to the provision attempting retrospectively to save the charter obligations after a surrender had been accepted. Therefore the question is properly here whether these statutes impaired the rights of the railroad under the Constitution of the United States. For, in order to determine whether the later legislation impairs those rights, this court must decide for itself what those rights were. If, in the opinion of this court, the state had lost all right to demand any sum whatever under § 23 of the charter, legislation necessary to enforce such a demand is invalid, and may be pronounced so by this court, notwithstanding the fact that the cause of action now is based upon the original act. We shall recur to the question of our jurisdiction after discussing the merits of the case,...