A statute of a state fixing at three cents a mile the maximum
fare that any railroad corporation may take for carrying a
passenger within the state is not, as applied to a corporation
reorganized by the purchasers at the
Page 125 U. S. 681
sale of a railroad under a decree of foreclosure, shown to be a
taking of property without due process of law in contravention of
the Fourteenth Amendment to the Constitution of the United States
by evidence that, under that restriction, and with its existing
traffic, its net yearly income will pay less than one and a half
percent on the original cost of the road, and only a little more
than two percent on the amount of the bonded debt, without any
proof of the cost of the bonded debt, or the amount of the capital
stock of the reorganized corporation, or the price paid by this
corporation for the road.
A statute of a state classifying its railroad corporations by
the length of their lines and fixing a different limit of the rate
of passenger fares in each class does not deny to any corporation
the equal protection of the laws within the Fourteenth Amendment to
the Constitution of the United States.
The original action was brought in an inferior court of the
State of Arkansas by Beidelman against Dow, Matthews, and Moran,
Trustees, alleging that the defendants were the legal owners and in
possession of the Memphis and Little Rock Railroad in that state,
more than a hundred miles long, and charged and took of the
plaintiff more than three cents a mile for a ticket between two
stations twenty-three miles apart on that road, in violation of a
statute of the state of April 4, 1887, the material provisions of
which were as follows:
"SEC. 1. The maximum sum which any corporation, officer of
court, trustee, person or association of persons operating a line
of railroad in this state shall be authorized to charge and collect
for carrying each passenger over such line within this state in the
manner known as first class passage is hereby fixed at the
following named rates: on lines of railroad fifteen miles or less
in length, eight cents per mile; on lines over fifteen miles in
length and less than seventy-five miles in length, five cents; on
lines over seventy-five miles in length, three cents per mile."
"SEC. 3. Any of the persons or corporations mentioned in section
one that shall charge, demand, take or receive from any person or
persons aforesaid any greater compensation for the transportation
of passengers than is in this act allowed or prescribed shall
forfeit or pay for every such offense any sum not less than fifty
dollars nor more than three hundred dollars, and costs of suit,
including a reasonable attorney's fee, to be
Page 125 U. S. 682
taxed by the court where the same is heard, on original action,
by appeal or otherwise, to be recovered in a suit at law by the
party aggrieved in any court of competent jurisdiction."
Acts of 1887, p. 227.
At the trial before the court, a jury having been waived, the
parties agreed upon the following statement of facts:
"The Memphis and Little Rock Railroad Company was incorporated
under the Act of the General Assembly of the State of Arkansas
approved January 11, 1853, which act is taken as a part hereof.
See acts of 1852, p. 130."
"On May 1, 1860, it mortgaged its property to Samuel Tate,
Robert C. Brinckley, and George C. Watkins, trustees. On March 1,
1871, it executed a second mortgage on its property and charter to
Henry F. Vail, as trustee. On March 17, 1873, this second mortgage
was foreclosed by sale under the power, and the purchasers, on
November 17, 1873, organized a new company under the charter which
they called the Memphis and Little Rock Railway Company."
"On December 1, 1873, the Memphis and Little Rock Railway
Company mortgaged its charter and property to certain trustees.
This mortgage not being paid at maturity, the trustees thereunder
brought suit in the United States Circuit Court for the Eastern
District of Arkansas for its foreclosure, and the trustees in the
mortgage of May 1, 1560, were, on their own application, made
parties complainant, and on November 21, 1876, a final decree was
entered in the cause directing the foreclosure of both mortgages
and a sale for their satisfaction."
"On April 27, 1877, the mortgaged property was sold under the
decree, including the charter, and the purchasers at the sale
organized under the charter and called the new company the Memphis
and Little Rock Railroad Company, as reorganized. On May 1 and 2,
1877, the said last-named company issued bonds and executed to the
defendants its mortgage upon its property and charter, and, default
having been made in their payment, the defendants are in possession
as trustees for the mortgage bondholders."
"The legal right of the successive companies to organize under
the old charter is not admitted. "
Page 125 U. S. 683
"The railroad was built, prior to 1868, from Memphis to Madison
and from Little Rock to Du Vall's Bluff. It was built through the
intervening distance in 1869. The expense of constructing the
Memphis and Little Rock Railroad was $4,000,000, and the railroad
company has a bonded indebtedness of $2,850,000, bearing interest
at eight per cent per annum, and the defendants are in possession
as the representatives of the mortgage bondholders, default having
been made in the payment of interest on the bonds. The net income
of the road for the year 1886 was $162,000, earned principally from
passenger traffic, the charge for transportation having been five
cents per mile, and this has been about the average for recent past
years. With the same traffic that the road has now, and charging
for transportation at the rate of three cents per mile, the net
income will only be $58,000, which will pay less than one and
one-half per cent on the cost of the road, and only a little over
two per cent on its bonded indebtedness. The defendants do not
anticipate any increase of traffic on account of the reduction, for
the reason that the St. Louis, Iron Mountain and Southern Railway,
from which the Memphis and Little Rock Railroad derives nearly all
of its through business, is building a parallel branch from Bald
Knob in the State of Arkansas to the City of Memphis, and, being a
hostile and rival line to that of these defendants, will carry over
that branch the through passengers who would otherwise go over the
road of the defendants. The most profitable traffic has been the
through traffic, and the defendants anticipate a great diminution
in their present traffic when said branch is completed, and it
will, to all appearances, be completed during the summer of
1887."
"The length of the defendant's road is one hundred and
thirty-five miles. Forty miles of that distance, from Madison to
Memphis, is through a swamp in which there are virtually no
inhabitants and which is subject to overflow."
"Either party may refer to the statements in reference to the
railroads in Arkansas contained in Poor's Railroad Manual for 1886,
and the same shall be taken as evidence of the facts therein
stated. "
Page 125 U. S. 684
"The cost of constructing the Batesville and Brinkley Railroad
from Brinkley to Newport, a distance of sixty miles, has been
$375,000. Its rate of transportation before the act of 1887 was
five cents per mile. Its length is sixty miles. The Arkansas and
Louisiana Railroad is twenty-five miles long, and its cost is
$180,000."
"It is further agreed that in Arkansas, money is now and has
been for twenty years past lending currently at interest from six
to ten per cent per annum."
Some statements in Poor's Railroad Manual for 1886 were
introduced in evidence under the agreed statement of facts, and are
copied in the margin.
* No other
evidence was introduced. The court therefore found the facts to be
as above agreed and as shown in the extracts from Poor's Manual.
The defendants asked the court to make the following declarations
of law:
"First. The Act of the General Assembly of the State of Arkansas
approved April 4, 1887, insofar as it relates to the present
proceeding, is unconstitutional, null and void because, under the
guise of regulating charges for the carriage of passengers on
railroads, it amounts virtually to the confiscation of the property
of the railroad in the hands of said defendants,
Page 125 U. S. 685
and is an unreasonable, unjust, and oppressive taking of private
property for public uses without compensation in violation of the
Constitution of the State of Arkansas and that of the United
States."
"Second. The said act of the General Assembly is
unconstitutional because it is special legislation and makes
arbitrary discriminations between different railroads not based
either upon their value, their earnings, or other valid grounds,
but based simply on the respective lengths of the several
railroads."
The court refused to make either of those declarations of law,
and gave judgment for the plaintiff for a penalty of fifty dollars
and a counsel fee of twenty-five dollars. The defendants excepted
to the refusal and appealed to the supreme court of the state,
which affirmed the judgment.
The defendants sued out this writ of error and assigned for
error that the court erred in holding that the statute of Arkansas
of April 4, 1887, was not repugnant to the clause of the Fourteenth
Amendment to the Constitution of the United States which provides
that no State shall deprive any person of life, liberty or property
without due process of law and in holding that that statute was not
repugnant to the clause of that Amendment which declares that no
state shall deny to any person within its jurisdiction the equal
protection of the laws.
Page 125 U. S. 686
MR. JUSTICE GRAY delivered the opinion of the Court.
The general rule of law that governs this case has been clearly
stated and developed in opinions of this Court delivered by the
late Chief Justice.
In
Munn v. Illinois, 94 U. S. 113,
decided at October term, 1876, after affirming the doctrine that by
the common law carriers or other persons exercising a public
employment could not charge more than a reasonable compensation for
their services, and that it is within the power of the
legislature
"to declare what shall be a reasonable compensation for such
services, or, perhaps more properly speaking, to fix a maximum
beyond which any charge made would be unreasonable,"
the Chief Justice said:
"To limit the rate of charges for services rendered in a public
employment or for the use of property in which the public has an
interest is only changing a regulation which existed before. It
establishes no new principle in the law, but only gives a new
effect to an old one."
94 U.S.
94 U. S.
133-134.
In
Chicago, Burlington &
Quincy Railroad v. Iowa, 94
Page 125 U. S. 687
U.S. 155, decided at the same time, a corporation having a
perpetual lease of the railroad of another organized under the
general corporation law of Iowa of 1851, c. 43, with the same
powers as private individuals to make contracts, as well as the
power to establish bylaws and make all rules and regulations deemed
expedient for the management of its affairs, in accordance with
law, was held to be bound by the subsequent statute of Iowa of
1874, c. 68, entitled "An act to establish reasonable maximum rates
of charges for transportation of freight and passengers on the
different railroads of this state," by which those railroads were
classified according to the gross amount of their earnings per mile
for the preceding year, and the compensation per mile which those
of each class might receive for the transportation of a passenger
with ordinary baggage was limited to three cents, three cents and a
half, and four cents, respectively. Iowa Laws of 1874, p. 61. The
Chief Justice said:
"Railroad companies are carriers for hire. They are incorporated
as such, and given extraordinary powers, in order that they may
better serve the public in that capacity. They are therefore
engaged in a public employment, affecting the public interest, and,
under the decision in
Munn v. Illinois, 94 U. S.
113, subject to legislative control as to their rates of
fare and freight, unless protected by their charters. . . . This
company, in the transactions of its business, has the same rights
and is subject to the same control as private individuals under the
same circumstances. It must carry when called upon to do so, and
can charge only a reasonable sum for the carriage. In the absence
of any legislative regulation upon the subject, the courts must
decide for it, as they do for private persons when controversies
arise, what is reasonable. But when the legislature steps in and
prescribes a maximum of charge, it operates upon this corporation
the same as it does upon individuals engaged in a similar
business."
94 U.S.
94 U. S.
161-162.
The same rule was affirmed and acted on in several other cases
decided at the same time, in the first of which the Chief Justice,
in answering "the claim that the courts must decide what is
reasonable, and not the legislature," said:
"Where
Page 125 U. S. 688
property has been clothed with a public interest, the
legislature may fix a limit to that which in law shall be
reasonable for its use. This limits the courts as well as the
people. If it has been improperly fixed, the legislature, not the
courts, must be appealed to for the change."
Peik v. Chicago & Northwestern Railway,
94 U. S. 164,
94 U. S. 178;
Chicago, Milwaukee & St. Paul Railroad v. Ackley,
94 U. S. 179;
Winona & St. Peter Railroad v. Blake, 94 U. S.
180;
Stone v. Wisconsin, 94 U. S.
181.
Upon like grounds, in
Ruggles v. Illinois, 108 U.
S. 526, and
Illinois Central Railroad v.
Illinois, 108 U. S. 541,
decided at October term, 1882, the statute of Illinois of April 15,
1871 (Illinois Laws of 1871, p. 640), which classified the
railroads in the state according to their gross annual earnings per
mile and put different limits on the compensation of the different
classes per mile for carrying a passenger and his baggage, was
adjudged in opinions delivered by the Chief Justice to be
constitutional and valid in restricting to the limit of three cents
a mile existing corporations whose charters gave them power to make
all bylaws, rules, and regulations not repugnant to law and gave
their directors power to establish such rates of toll as they
should by their bylaws determine. And two justices who did not
assent to those opinions concurred in the judgments because it was
not shown that the rate prescribed by the legislature was
unreasonable.
In
Stone v. Farmers' Loan & Trust Co., 116 U.
S. 307, decided at October term, 1885, the obligation of
a contract, created by a charter granting similar powers to a
railroad corporation and its directors, was held not to be impaired
by a statute of Mississippi establishing a board of railroad
commissioners charged with the duty of preventing the exaction of
unreasonable or discriminating rates upon transportation done
within the limits of the state, and the Chief Justice said:
"It is now settled in this Court that a state has power to limit
the amount of charges by railroad companies for the transportation
of persons and property within its own jurisdiction unless
restrained by some contract in the charter or unless what is done
amounts to a regulation of foreign or interstate
Page 125 U. S. 689
commerce."
116 U.S.
116 U. S. 325.
He added, however:
"From what has thus been said, it is not to be inferred that
this power of limitation or regulation is itself without limit.
This power to regulate is not a power to destroy, and limitation is
not the equivalent of confiscation. Under pretense of regulating
fares and freights, the state cannot require a railroad company to
carry persons and property without reward; neither can it do that
which in law amounts to a taking of private property for public use
without just compensation or without due process of law."
116 U.S.
116 U. S. 331.
The opinions of the two dissenting Justices were grounded upon the
provisions of the charter, and upon its not having been expressly
made subject to alteration or repeal by the legislature. The cases,
decided at the same time, of
Stone v. Illinois Central
Railroad, 116 U. S. 347, and
Stone v. New Orleans & Northeastern Railroad,
116 U. S. 352,
were substantially similar.
As applied to freights and fares for transportation not
extending beyond the limits of the state by which the railroad
company is incorporated, the authority of the legislature is not
affected by the later decision in
Wabash, St. Louis &
Pacific Railway v. Illinois, 118 U. S. 557.
The case at bar is quite clear of any of the questions upon
which the members of the Court have heretofore differed in opinion.
If the Memphis & Little Rock Railroad Company, as reorganized
by the purchasers at the sale under the decree of foreclosure of
the previous mortgages, was a lawful corporation of the State of
Arkansas, it was not the same corporation as that chartered by the
legislature in 1853, but was a new corporation, subject to the
provisions of the constitution and laws in force when it first came
into existence -- that is to say, in 1877.
Memphis & Little
Rock Railroad v. Commissioners, 112 U.
S. 609.
The Constitution of Arkansas of 1874 contains the following
provisions:
"Corporations may be formed under general laws, which laws may,
from time to time, be altered or repealed. The general assembly
shall have power to alter, revoke, or annul
Page 125 U. S. 690
any charter of incorporation now existing and revocable at the
adoption of this constitution, or that may be hereafter created,
whenever in their opinion it may be injurious to the citizens of
the state, in such manner, however, that no injustice shall be done
to the corporators."
Art. 12, § 6.
"The general assembly shall pass laws to correct abuses and
prevent unjust discrimination and excessive charges by railroad,
canal, and turnpike companies for transporting freight and
passengers, and shall provide for enforcing such laws by adequate
penalties and forfeitures."
Art. 17, § 10.
The Legislature of Arkansas, by the statute of April 4, 1887,
fixed the maximum fare that any corporation, trustees, or persons
operating a line of railroad might charge and collect for carrying
a passenger within the state at eight cents a mile on a line
fifteen miles long or less, five cents a mile on a line more than
fifteen and less than seventyfive miles long, and three cents a
mile on a line more than seventyfive miles long. The line of the
road of the plaintiffs in error is more than seventyfive miles
long, and they charged more than three cents a mile, and were
therefore held to be subject to the penalty imposed by the statute
for any violation of its provisions.
The plaintiffs in error do not contend that it is always or
generally unreasonable to restrict the rate for carrying each
passenger to three cents a mile. They argue that it is so in this
case by reason of the admitted fact that with the same traffic that
their road has now, and charging for transportation at the rate of
three cents per mile, the net yearly income will pay less than one
and a half percent on the original cost of the road, and only a
little more than two percent on the amount of its bonded debt. But
there is no evidence whatever as to how much money the bonds cost,
or as to the amount of the capital stock of the corporation as
reorganized, or as to the sum paid for the road by that corporation
or its trustees. It certainly cannot be presumed that the price
paid at the sale under the decree of foreclosure equaled the
original cost of the road or the amount of outstanding bonded debt.
Without any proof of the sum invested by the reorganized
corporation or its trustees, the Court has no means, if
Page 125 U. S. 691
it would under any circumstances have the power, of determining
that the rate of three cents a mile fixed by the legislature is
unreasonable. Still less does it appear that there has been any
such confiscation as amounts to a taking of property without due
process of law.
It is equally clear that the plaintiffs in error have not been
denied the equal protection of the laws.
The legislature, in the exercise of its power of regulating
fares and freights, may classify the railroads according to the
amount of the business which they have done or appear likely to do.
Whether the classification shall be according to the amount of
passengers and freight carried, or of gross or net earnings during
a previous year, or according to the simpler and more constant test
of the length of the line of the railroad, is a matter within the
discretion of the legislature. If the same rule is applied to all
railroads of the same class, there is no violation of the
constitutional provision securing to all the equal protection of
the laws.
A similar question was presented and decided in
Burlington
& Quincy Railroad v. Iowa, above cited. It was there
objected that a statute regulating the rate for the carriage of
passengers by different classes of railroads according to their
gross earnings per mile was in conflict with art. 1, sec. 4, of the
Constitution of Iowa, which provides that "all laws of a general
nature shall have a uniform operation," and "the general assembly
shall not grant to any citizen, or class of citizens, privileges or
immunities which, upon the same terms, shall not equally belong to
all citizens." In answering that objection, the Chief Justice
said:
"The statute divides the railroads of the state into classes
according to business, and establishes a maximum of rates for each
of the classes. It operates uniformly on each class, and this is
all the constitution requires. . . . It is very clear that a
uniform rate of charges for all railroad companies in the state
might operate unjustly upon some. It was proper therefore to
provide in some way for an adaptation of the rates to the
circumstances of the different roads, and the general assembly, in
the exercise of its legislative discretion, has seen fit to do this
by a system
Page 125 U. S. 692
of classification. Whether this was the best that could have
been done is not for us to decide. Our province is only to
determine whether it could be done at all and under any
circumstances. If it could, the legislature must decide for itself,
subject to no control from us, whether the common good requires
that it should be done."
94 U.S.
94 U. S.
163-164.
Judgment affirmed.
* Net earnings of Batesville and Brinkley Railroad for 1885,
$29,163.25.
Net earnings of the Arkansas and Louisiana Railroad for 1850,
$34; 429.88.
Length of St. Louis, Iron Mountain and Southern Railway, 923
miles. Mortgaged for $35,564,352.61; 5, 7, and 8 percent. Net
earnings, $3,619,416.63. Rate of charges has been three cents per
mile.
Length of the Little Rock and Fort Smith Railroad, 165 miles.
Mortgaged for $2,379,500; 7 percent. Net profits, $225,910.31. Rate
of charges has been five cents per mile.
Length of the Little Rock, Mississippi River and Texas Railway,
162 miles. Mortgaged for $2,977,500; 7 percent. Net earnings,
$99,604.44. Rate of charges has been five cents per mile.
Length of the St. Louis, Arkansas and Texas Railway, 735.21
miles. Mortgaged for $18,375,000; 6 percent. Net earnings,
$67,644.30.
Length of St. Louis and San Francisco Railroad, 814.88 miles.
Mortgaged for $26,026,000. Net earnings, $2,573,772.70.
Length of Kansas City, Springfield and Memphis Railway, 281.94
miles. Mortgaged for $7,800,000; 6 percent. Net earnings,
$365,160.88.
