Stone v. Farmers' Loan & Trust Co.
116 U.S. 307 (1886)

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U.S. Supreme Court

Stone v. Farmers' Loan & Trust Co., 116 U.S. 307 (1886)

Stone v. Farmers' Loan & Trust Company

Argued October 13-14, 1885

Decided January 4, 1886

116 U.S. 307

Syllabus

The right of a state to reasonably limit the amount of charges by a railroad company for the transportation of persons and property within its jurisdiction cannot be granted away by its legislature unless by words of positive grant or words equivalent in law.

A statute which grants to a railroad company the right "from time to time to fix, regulate and receive, the tolls and charges by them to be received for transportation" does not deprive the state of its power, within the limits of its general authority, as controlled by the Constitution of the United States, to act upon the reasonableness of the tolls and charges so fixed and regulated.

An act of incorporation which confers upon the directors of a railroad company the power to make bylaws, rules, and regulations touching the disposition and management of the company's property and all matters appertaining to its concerns confers no right which is violated by the creation of a state railroad commission charged with the general duty of preventing the exaction of unreasonable or discriminating rates upon transportation done within the limits of the state and with the enforcement of reasonable police regulations for the comfort, convenience, and safety of travelers and persons doing business with the company within the state.

A railroad forming a continuous line in two or more states, and owned and managed by a corporation whose corporate powers are derived from the legislature of each state in which the road is situated, is, as to the domestic traffic in each state, a corporation of that state, subject to state laws not in conflict with the Constitution of the United States.

This Court agrees with the Supreme Court of Mississippi that a statute creating a commission, and charging it with the duty of supervising railroads, is not in conflict with the Constitution of that state.

The provisions of the statute of Mississippi of March 11, 1884, creating a railroad commission are not so inconsistent and uncertain as to necessarily render the entire act void on its face.

This is a suit brought by the Farmers' Loan and Trust Company, a New York corporation, to enjoin the Railroad

Page 116 U. S. 308

Commission of Mississippi from enforcing against the Mobile and Ohio Railroad Company the provisions of the statute of Mississippi passed March 11, 1884, entitled

"An act to provide for the regulation of freight and passenger rates on railroads in this state, and to create a commission to supervise the same, and for other purposes."

That act is as follows:

"SECTION 1. Be it enacted by the Legislature of the State of Mississippi that the track of every railroad in this state is a public highway, over which all persons have equal rights of transportation for passengers and freights on the payment of just compensation to the owner of the railroad for such transportation, and any person or corporation engaged in transporting passengers or freights over any railroad in this state who shall exact, receive, or demand more than the rate specified in any bill of lading issued by such person or corporation, or who, for his or its advantage or for the advantage of any connecting line or for any person or locality, shall make any discrimination in transportation against any individual, locality, or corporation shall be guilty of extortion."

Sections 2 and 3 relate to the punishment of those so guilty, and their liability in double damages to parties injured. Sections 4 and 5 provide for the appointment of three commissioners, to be known as the "Railroad Commission of the State of Mississippi," prescribe their qualifications and tenure of office, fix their salaries, and subject them to penalties and punishment for violation of duty. Section 6 is as follows:

"SEC. 6. Be it further enacted that it shall be the duty of all persons or corporations who shall own or operate a railroad in this state, within thirty days after the passage of this act, to furnish the commission with its tariff of charges for transportation of every kind, and it shall be the duty of said commission to revise said tariff of charges so furnished and determine whether or not, and in what particular, if any, said charges are more than just compensation for the services to be rendered, and whether or not unjust discrimination is made in such tariff of charges against any person, locality, or corporation, and when said charges are corrected, as approved by said

Page 116 U. S. 309

commission, the commission shall then append a certificate of its approval to said tariff of charges; but in revising or establishing any and every tariff of charges, it shall be the duty of said commission to take into consideration the character and nature of the service to be performed and the entire business of such railroad, together with its earnings from the passenger and other traffic, and shall so revise such tariffs as to allow a fair and just return on the value of such railroad, its appurtenances and equipments, and it shall be the duty of said commission to exercise a watchful and careful supervision over every such tariff of charges and continue such tariff of charges from time to time as justice to the public and each of said railroad companies may require, and to increase or reduce any of said rates according as experience and business operations may show to be just, and said commission shall accordingly fix tariffs of charges for those railroads failing to furnish tariffs as above required. And it shall be the duty of said railroad companies, or persons operating any railroad in this state, to post at each of its depots all rates, schedules, and tariffs for the transportation of passengers and freights made or approved by said railroad commission, with said certificate of approval, within ten days after said approval, in some conspicuous place at such depot, and it shall be unlawful for any such person or corporation to make any rebate or reduction from such tariff in favor of any person, locality, or corporation which shall not be made in favor of all other persons, localities, or corporations by a change in such published rates, except as may be allowed by the commission, and when any change is contemplated to be made in the schedule of passenger or freight rates of any railroad by the commission, said commission shall give the person or corporation operating or managing said railroad notice in writing at least ten days before such change of the time and place at which such change will be considered."

Section 7 makes it unlawful for a company to grant reductions or rebates prohibited by the act, and fixes a penalty for so doing.

Section 8 allows reduced rates for certain kinds of transportation.

Page 116 U. S. 310

Section 9 is as follows:

"SEC. 9. Be it further enacted that it shall be the duty of said commission to hear all complaints made by any person against any such tariff of rates so approved on the ground that the same in any respect is for more than just compensation or that such charges, or any of them, amount to or operate so as to effect unjust discrimination. Such complaint must be in writing, and specify the items in the tariff against which complaint is made. And if it appears to the commission that there may be justice in the complaint or that the matter ought to be investigated, the commission shall forthwith furnish to the person or corporation operating the railroad a copy of the complaint, together with notice, which said notice shall be served as other legal process is now required by law to be served on railroad companies, that at a time and place stated in the notice that tariff, as to said items, will be revised by the commission, and at such time and place it shall be the duty of the commission to hear the parties to the controversy in person or by counsel, or both, and such evidence as may be offered, oral or in writing, and may examine witnesses on oath, conforming to the mode of proceedings, as nearly as may be convenient, to that required of arbitrators, giving such time and latitude to each side, and regulating the opening and conclusion of any argument, as the commission may consider best adapted to arrive at the truth, and when the hearing is concluded, the commission shall give notice of any change deemed proper by them to be made to the person or corporation operating the railroad, provided in no instance shall any corporation, railroad, or person be criminally or civilly liable for the making of any charge or discrimination whatever if the same is not in violation of the tariff of charges or rules and regulations prescribed by the commission."

Sections 10 and 11 are unimportant in this case.

The remainder of the statute is as follows:

"SEC. 12. Be it further enacted that every person or corporation operating a railroad in this state shall furnish the said commission with all the information required relative to the management of their respective lines, and particularly with

Page 116 U. S. 311

copies of all leases, contracts, and agreements for transportation with express, sleeping car, or other companies to which they are parties."

"SEC. 13. Be it further enacted that every railroad company shall, within twenty-four hours after the occurrence of any accident to a train attended with serious personal injury on any portion of its line within the limits of this state, give notice of the same to the railroad commissioners, who, upon information of such accident, may repair or dispatch one or more of their number to the scene of said accident and inquire into the facts and circumstances thereof, which shall be recorded in the minutes of their proceedings, and embraced in their annual report."

"SEC. 14. Be it further enacted that the commission shall make annual reports to the governor on or before the first day of January in each year, for transmission to the legislature, of their doings for the year ending on the 30th day of September next preceding, containing such facts as will disclose the actual workings of the railway system in this state and such suggestions as to the general railroad policy of the state as may seem to them appropriate."

"SEC. 15. Be it further enacted that it shall be the duty of every railroad company or person operating a railroad in this state to make quarterly returns of the business of said railroad to the railroad commission of Mississippi, which returns shall embrace all the receipts and expenditures of said railroad, and to be made according to forms furnished by the said railroad commissioners for that purpose."

"SEC. 16. Be it further enacted that the quarterly returns herein provided shall be made as aforesaid within thirty days after the end of each quarter to which they relate, and any railroad company, or persons operating any railroad in this state, which shall fail or refuse to make the quarterly returns as provided for in this act, shall forfeit to the State of Mississippi fifty dollars for every day of such refusal or neglect."

"SEC. 17. Be it further enacted that the said quarterly returns shall be sworn to by one or more officers of said company or of the persons operating the said railroad who has

Page 116 U. S. 312

knowledge of their truth, and any person knowingly swearing falsely to any statement in any of said quarterly reports shall be guilty of perjury."

"SEC. 18. Be it further enacted that it shall be the duty of the commissioners to inspect the depots of the railroads operated in this state and see that at least one comfortable and suitable reception room is provided at each depot for the use and accommodation of persons desiring and awaiting transportation over their line, and any railroad company failing or refusing to provide such room, after sixty days' notice from the commissioners to provide the same, shall be liable to a penalty of not less than fifty dollars for each day they so fail or refuse to provide such room, and said railroad company shall keep at all times in such reception rooms a bulletin board, which shall show the time of the arrival and departure of trains, and when any passenger train or other train for transporting passengers is delayed, notice of same shall be made on said bulletin board for the information of passengers, stating, as nearly as can be ascertained, the extent of the delay and probable time of arrival."

"SEC. 19. Be it further enacted that the determination of every matter of said commission shall be in writing, and proof thereof shall be made by a copy of the same, duly certified to by the clerk of said commission, and whenever may matter has been determined by said commission in the course of any proceeding before it relating to the regulation or supervision of any railroad in this state and coming within the jurisdiction of such commission, proof of the fact of such determination, duly certified as aforesaid, shall be received in all the courts of this state or before any officers thereof, in all civil cases, as prima facie evidence that such determination was right and proper, and the record of the proceedings of said commission shall be deemed a public record, and shall at all reasonable times be subject to the inspection of the public."

"SEC. 20. Be it further enacted that said commission, or any one of said commissioners, may, in the discharge of any of the duties imposed upon them by this act, administer oaths, take affidavits, and summon and examine witnesses under oath in all matters coming before them, and if any person shall testify

Page 116 U. S. 313

or make any false affidavit or oath before said commission or before any of said commissioners or before any officers to any matter coming before said commission, he shall be deemed guilty of perjury, and upon conviction thereof shall be punished according to law."

"SEC. 21. Be it further enacted that all summons for witnesses to appear before said commission or before any one or more of said commissioners, and notice to persons or corporations, shall be issued by one of said commissioners, and be directed to any sheriff, constable, or marshal, of any city or town, who shall execute the same in his bailiwick, and make due return thereof as directed therein under the penalties prescribed by law for a failure to execute and return the process of any court, and if any person, duly summoned to appear and testify before said commission, or before any one or more of said commissioners, shall fail or refuse to appear and testify without a lawful excuse, or shall refuse to answer any proper question propounded to him by said commission or any of said commissioners, or if any person shall obstruct said commission or one or more of said commissioners in the discharge of duty or shall conduct himself in a rude, disrespectful, or disorderly manner before said commission or any of them deliberating in the discharge of duty, such person shall be deemed guilty of a misdemeanor, and, upon conviction thereof shall be fined not less than fifty nor more than one thousand dollars."

"SEC. 22. Be it further enacted that witnesses summoned to appear before said commission shall be entitled to the same per diem and mileage as witnesses attending circuit court, and witnesses summoned by said commission on its behalf shall be paid out of the state treasury on warrants to be drawn by the auditor, upon the certificate of the commission, showing the amount and items thereof, to which such witness may be entitled, and witnesses summoned for any railroad shall be paid by such railroad."

"SEC. 23. Be it further enacted that if any railroad company or person or corporation operating any railroad in this state shall violate any of the provisions of this act or the tariff of charges as fixed by such commission, such company,

Page 116 U. S. 314

person, or corporation, shall be liable to a penalty of five hundred dollars for each violation not otherwise provided for, and such penalty may be recovered by an action to be brought in the name of the State of Mississippi in any county where such violation may occur or injury or wrong be done. The commission shall institute such action through the district attorney of the proper district, and no such suit shall be dismissed without the consent of the court and of said commission, and if any district attorney shall neglect for thirty days after notice to bring any such suit, the commission may direct some attorney at law to bring the same, and his fee therefor shall be fixed by the court, and shall not exceed fifty percent of the amount collected, and the district attorney shall not interfere in such suit, and the same shall not be dismissed without consent as aforesaid, provided that in all trials of cases brought for a violation of any tariff of charges as fixed by the commission, it may be shown in defense that such tariff so fixed was unjust."

"SEC. 24. Be it further enacted, that the remedies hereby given shall be regarded as cumulative to the remedies now given by law against railroad corporations, and this act shall not be construed as repealing any statute giving such remedies."

"SEC. 25. Be it further enacted that the provisions of this act shall apply to and include all persons, firms, and companies, and to all associations of persons, whether incorporated or otherwise, that shall operate a railroad in this state (street railways excepted)."

"SEC. 26. Be it further enacted that hereafter the election of railroad commissioners shall be at such time, in such manner, and for such term as may be determined by the legislature."

"SEC. 27. Be it further enacted that the schedules adopted by the for charges for transportation of persons and freight shall not be enforced against any railroad in this state before the first day of May, A.D. 1884."

"SEC. 28. Be it further enacted that this act shall take effect and be in force from and after its passage."

On the 15th of March, 1884, the following supplemental act was passed:

Page 116 U. S. 315

"SEC. 1. Be it enacted by the Legislature of the State of Mississippi that the act entitled"

"An act to provide for the regulation of freight and passenger rates on railroads in this state, and to create a commission to supervise the same, and for other purposes,"

"approved March 11, 1884, shall not be so construed as to authorize said commissioners to require bulletin boards to denote the delay of trains noted thereon, or to require the erection of stationhouses, in any case where in their judgment the public travel does not make it necessary; nor shall said act be so construed as to require said commission to investigate or call upon any railroad company for rates of charges in transportation or travel from any point outside of this state to points outside of this state, or in any way interfere with such rates of charges."

On the third of February, 1848, the Legislature of Alabama passed an act to incorporate the Mobile and Ohio Railroad Company, with power

"to locate, construct, and finally complete a single, double, or treble railroad or way from some suitable point in the City of Mobile in a westerly or northwesterly direction to the west line of this state, toward the mouth of the Ohio River in such route as shall be deemed most expedient, and to transport, take, and carry property and persons upon said railroad or way by the power and force of steam, of animals, or of any other mechanical or other power, or any combination of them, which said company may choose to apply,"

and

"with permission to make any lawful contract with any other railroad corporation in relation to the business of said company, and also to make joint stock with any other railroad corporation."

The immediate government and direction of the affairs of the company was vested in a board of directors, to be chosen by the stockholders, and by § 7 it was provided

"That the directors shall have full power to make and prescribe such bylaws, rules, and regulations as they shall deem needful and proper touching the disposition and management of the stock, property, estate, and effects of said company not contrary to this charter or the laws of this state or of the United States, the transfer of shares, the duties and conduct of their officers

Page 116 U. S. 316

and servants, touching the election of and meeting of the directors, and all matters whatsoever which may appertain to the concerns of said company."

Section 12 is as follows:

"SEC. 12. And be it further enacted that it shall be lawful for the company hereby incorporated, from time to time, to fix, regulate, and receive the toll and charges by them to be received for transportation of persons or property on their railroad or way aforesaid, hereby authorized to be constructed, erected, built, or used, or upon any part thereof."

On the 17th of February, 1848, the Legislature of Mississippi passed "An act to incorporate the Mobile and Ohio Railroad Company." This act, after reciting the incorporation of the company in Alabama and setting out that act of incorporation in full, "the same as printed in Alabama," and also reciting that Mississippi was "desirous to aid in accomplishing the object of the said act," proceeded as follows:

"SEC 1. Be it enacted by the Legislature of the State of Mississippi that the railroad described in the above-recited act be extended, in the State of Mississippi, from the Alabama line to the State of Tennessee in such direction and on such a route as shall be deemed most expedient, and that as to said extension there is granted to the said Mobile and Ohio Railroad Company, when organized, the same rights, powers, and privileges as are granted to it within the State of Alabama by the said act, subject, however, to the same and similar conditions, restriction, modifications, and provisions as are in said act above recited, contained and set forth, excepting the provision contained in section 15 of said act, and the said act is hereby concurred in and adopted within the State of Mississippi in reference to the said railroad as extended, and in reference to the said Mobile and Ohio Railroad Company, with the exception of that portion contained in section 15, as before stated, provided that in case of persons absent or unknown, whose lands may be condemned pursuant to sections 7, 8, and 9 of said recited act, the placing of the amount of the damages assessed to the credit of the owner, in the hands of the state treasurer, shall be taken as payment, and on such owner appearing

Page 116 U. S. 317

or tendering satisfactory evidence of his claim thereto, such damages shall be paid him by the treasurer on the warrant of the auditor of public accounts."

The excepted section related to taxation, and as to this a different provision was made in Mississippi from that in the Alabama charter. Power was also given the company to cross the tracks of other railroads in Mississippi, and some slight changes were made in the provision for depositing the amount of damages assessed upon the condemnation of property for the use of the company. Otherwise the charters of the company in these two states were substantially identical.

On the same day, February 28, 1848, the Legislature of Tennessee passed "An act to incorporate the Mobile and Ohio Railroad Company and the Tennessee Central Railroad Company." This act began as follows:

"Whereas it appears to this General Assembly, from the memorial of Jonathan Emanuel, President, and George N. Stewart, Sidney Smith, Moses Waring, Charles Le Baron, and S. Griffith Fisher, directors, of the Mobile and Ohio Railroad Association, that a company has been organized at Mobile, in the State of Alabama, for the purpose of constructing a railroad from Mobile to the Tennessee River, and from thence to a suitable point near the mouth of the Ohio River, for which purpose said board of president and directors have applied to this general assembly for the passage of such a law as may be necessary to authorize the construction of said road through the State of Tennessee, and whereas it is deemed a matter of vital importance to this state that a direct communication by railroad to the Gulf of Mexico be established, therefore,"

"SEC 1. Be it enacted by the General Assembly of the State of Tennessee that the said Jonathan Emanuel, president, and the said George N. Stewart Sidney Smith, Moses Waring, Charles Le Baron, and S. Griffith Fisher, directors, and their associates, who shall be the stockholders of said company, and their successors, under the name and style of 'The Mobile and Ohio Railroad Company,' are hereby declared to be a body corporate and politic under the laws of Tennessee,

Page 116 U. S. 318

with succession for five hundred years, and a common seal, with capacity to have, receive, and enjoy, to them and their successors, property and estate of whatsoever nature and quality, and the same to alien, transfer, and dispose of, so far as may be necessary to carry into effect the main object of this charter, which is hereby declared to be the construction, use, and maintenance of a railroad from Mobile, in the State of Alabama, to some point on the Mississippi or Ohio River near the mouth of the Ohio, passing through the State of Tennessee."

The remainder of the act relates to the powers and privileges of the company in Tennessee.

On the 26th of February, 1848, the General Assembly of Kentucky passed an act "to authorize the Mobile and Ohio Railroad Company to extend their railroad from the south boundary line of the State of Kentucky to the Mississippi or Ohio Rivers," as follows:

"SEC 1. Be it enacted by the General Assembly of the Commonwealth of Kentucky that the Mobile and Ohio Railroad Company, when formed under the Act of the General Assembly of the State of Alabama approved February 3 1848, entitled 'An act to incorporate the Mobile and Ohio Railroad Company,' shall be allowed the privilege of making any necessary reconnaissance and survey for the purpose of ascertaining the most eligible route for extending the Mobile and Ohio Railroad to any point upon the Mississippi or Ohio Rivers in this state."

"SEC. 2. Be it further enacted that as soon as said route and point shall be ascertained, the said Mobile and Ohio Railroad Company shall be allowed the right of way for the extension and construction of their said railroad from the Tennessee line to the Mississippi or Ohio Rivers, and that they shall be entitled to all the privileges, rights, and immunities, and subject to all such restrictions, as are granted, made, and prescribed for the benefit, government, and direction of said Mobile and Ohio Railroad Company within the State of Alabama by the act above described."

On the 20th of September, 1850, Congress passed

"An Act

Page 116 U. S. 319

granting the right of way and making a grant of land to the States of Illinois, Mississippi, and Alabama in aid of the construction of a railroad from Chicago to Mobile."

This act provided

"that the said railroad and branches shall be and remain a public highway for the use of the government of the United States, free from toll or other charges,"

and

"that the United States mail shall at all times be transported on the said railroad, under the direction of the Post Office Department at such price as the Congress may by law direct."

These lands were transferred by Alabama and Mississippi to the Mobile and Ohio Railroad Company in 1850 and 1851, and in 1859 Congress ratified and confirmed the grants and extended the time for building the road.

The case was heard on demurrer to the bill. The circuit court rendered a decree allowing the injunction, and from that decree this appeal was taken.

Page 116 U. S. 324

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