The same rule by which the federal court has jurisdiction to
determine all the questions, local as well as federal, when a
federal question is raised by the bill governs the application for
preliminary injunction under the Act of June 18, 1910, c. 309, 36
Stat. 539, 557.
Unless the case imperatively demands such a decision, this Court
is reluctant to adjudge a state statute to be in conflict with the
state constitution before that question has been considered by the
Page 231 U. S. 299
tribunals to which the question properly belongs. Michigan
Central R. Co. v . Powers, 201 U. S. 245
Prescribing rates for the future is a legislative and not a
In prescribing intrastate rates, the legislature of a state may
act directly or, in the absence of constitutional restriction, it
may commit the authority to do so to a subordinate body, and
that the Legislature of Kentucky, by the Act of March
10, 1900, properly authorized the Railroad Commission of that
state, under certain conditions, to fix reasonable intrastate rates
for railroad transportation in conformity with the provisions of
the constitution of the state.
The legislature may determine what are reasonable rates either
directly or through a subordinate body and use methods like those
of judicial tribunals to elicit facts without invading the province
of the judiciary. Prentis v. Atlantic Coast Line,
211 U. S. 210
In this case, it does not appear that the state Railroad
Commission acted in an arbitrary manner in fixing intrastate
railroad rates; nor was it necessary to give legality to its order
as to particular rates established to require a reduction in other
Failure in a state statute establishing a railroad commission
and giving it authority to fix reasonable rates to provide for an
appeal from orders of the commission does not deny the carrier
right of access to the courts to review an order that fixes rates
so unreasonably low as to be confiscatory, and is not an
unconstitutional denial of due process of law under the Fourteenth
Presumably the state, as well as the federal, courts are open to
a carrier to test the constitutionality of an order made by a
railroad commission and to obtain protection by bill in equity
against its enforcement if unconstitutional. Home Telephone Co.
v. Los Angeles, 211 U. S. 265
Penalties which are so unreasonable and severe as to be an
unconstitutional denial of due process of law will not render a
rate statute unconstitutional if they are separable, as in this
The right of the carrier to make its own intrastate rates is
subject to the constitutionally enacted law of the state; in the
absence of a legislative rate, courts apply the common law in
passing upon the reasonableness of the rates, but after legislative
rates have been established, the courts apply those rates unless
there are constitutional objections.
So long as the legislature acts within its proper sphere, courts
cannot substitute their judgment with respect to reasonableness of
the established rates.
While a state may permit appeals to the courts from the
Page 231 U. S. 300
orders of it railroad commission, Prentis v. Atlantic Coast
Line, 211 U. S. 210
failure to provide for such an appeal doe not deny the carrier due
process of law a guaranteed by he Fourteenth Amendment.
Loss in revenue generally follows reduction in rates, but that
does not necessarily prove that the reduced rates are confiscatory;
there must be further proof that they do not allow a fair return
for service rendered.
An order of the Railroad Commission of Kentucky made under the
Act of March 10, 1900, is a legislative act under delegated power,
and has the same force a if made by the legislature, and is for
this reason a law passed by the state within the meaning of the
contract clause of the federal Constitution.
A charter provision is not violated under the contract clause by
a subsequent state law otherwise legal if, prior to the enactment
of the latter, the chartered corporation has subjected itself to
the operation of an amendment to the state constitution reserving
the power to alter, amend, and repeal charters and franchises.
Minnesota Rate Cases, 230 U. S. 352
followed to the effect that the establishment of railroad rates
wholly intrastate by a state Railroad Commission is not an
unwarrantable interference with, or a regulation of, interstate
In an equity suit by a carrier against the members of a state
railroad commission to restrain enforcement of a rate order under a
statute which provided for awards of reparation for failure to
comply with the order, the court should not pass upon the validity
of any of such award made to parties not before the court.
186 F. 176 affirmed.
The facts, which involve the constitutionality under the
Constitution of Kentucky and also under the Constitution of the
United States of the state Railroad Commission Statute of Kentucky
and the legality of orders made by the Commission, are stated in
Page 231 U. S. 301
MR. JUSTICE HUGHES delivered the opinion of the Court.
This is an appeal from an order denying a motion for an
interlocutory injunction. Louisville & Nashville R. Co. v.
186 F. 176. The motion was heard by three judges, and
the appeal is taken under § 17 of the Act of June 18, 1910, c. 309,
36 Stat. 539, 557.
The suit was brought by the Louisville & Nashville Railroad
Company, a corporation organized under the laws of Kentucky, to
enjoin the enforcement of two orders made by the Railroad
Commission of that state on August 10, 1910. One of these orders
prescribed maximum freight rates for certain intrastate traffic --
that is, for the transportation of corn, rye, barley, malt, empty
barrels, boxes, etc., from three points of origin, Louisville,
Covington, and Newport, to sixteen points of destination in
Kentucky. The second order awarded specified amounts in reparation
for payments previously made to the carrier for such transportation
in excess of the rates found to be reasonable.
For many years, the railroad company had given special rates to
the owners of distilleries along its lines in Kentucky for the
transportation of the commodities above mentioned, which
constituted their raw materials and supplies. These rates were
withdrawn on March 25, 1910, and what are described as the standard
rates of the company, that is, those which had theretofore been
charged to others than distillers, were substituted. Thereupon,
numerous distillery companies complained to the Railroad Commission
of the state, insisting that the new rates were exorbitant and that
the former rates were just
Page 231 U. S. 302
and reasonable. After hearing, the Commission sustained the
contention of the petitioners, and fixed the maximum rates in
question. These rates were the same as the special rates which,
prior to March 25, 1910, the railroad company had given to the
distillery companies, but, by the Commission's order, the rates as
fixed were made applicable to the transportation between the points
stated, of the described commodities, without distinction as to
persons or as to the use to be made of the commodities by the
The statute under which the Commission acted in establishing
these rates is that of March 10, 1900, known as the McChord Act
(Kentucky Statutes § 820a, Carroll's ed.1909). [Footnote 1
] It provides in substance that, when
complaint shall be made to the Railroad Commission accusing any
railroad company of charging extortionate rates, or when the
Commission shall receive information or have reason to believe that
such rates are being charged, it shall be its duty "to hear and
determine the matter as speedily as possible." The Commissioners
are to give the company complained of not less than ten days'
notice, stating the time and place of hearing and the nature of the
complaint or matter to be investigated. They
"shall hear such statements, argument, or evidence offered by
the parties as the Commission may deem relevant, and should the
Commission determine that the company or corporation is, or has
been, guilty of extortion, said Commission shall make and fix a
just and reasonable rate, toll, or compensation, which said
railroad company or corporation may charge, collect, or receive for
like services thereafter rendered."
The rate so fixed is to be entered as an order on the record
book of the Commission; a copy thereof is to be mailed to a
representative of the railroad company
Page 231 U. S. 303
affected, and it is to be "in full force and effect at the
expiration of ten days thereafter, and may be revoked or modified
by an order likewise entered of record." If the railroad company,
or any officer, agent, or employee thereof, charges a greater rate
for like services thereafter,
"said company . . . and said officer, agent, or employee, shall
each be deemed guilty of extortion, and upon conviction shall be
fined for the first offense in any sum not less than $500, nor more
that $1,000, and upon a second conviction, in any sum not less than
$1,000 nor more than $2,000, and for a third and succeeding
conviction in any sum not less than $2,000 nor more than
The circuit court in the appropriate counties as prescribed by
the statute is to have jurisdiction of such prosecutions, which are
to be by indictment.
The bill attacked the statute and the action of the Commission
as violative of the rights secured to the complainant by the
federal Constitution. Objections were also made under the
Constitution and statutes of the state. Demurrers were filed, but
upon these no decision was made. The motion for preliminary
injunction was heard upon bill and affidavits. In denying the
motion, the court did not pass upon the validity of the second
order, as it was of the opinion that those in whose favor the award
of reparation had been made were "necessary parties in interest;"
these had not been brought in. 186 F. 176, 203.
The order fixing rates.
Because of the federal questions raised by the bill the circuit
court had jurisdiction and was authorized to determine all the
questions in the case, local as well as federal. Siler v.
Louisville & Nashville R. Co., 213 U.
, 213 U. S. 191
A similar rule must be deemed to govern the application for
preliminary injunction under the statute, which requires a hearing
before three judges and authorizes an
Page 231 U. S. 304
appeal to this Court. 36 Stat. 557. This statute applies to
cases in which the preliminary injunction is sought in order to
restrain the enforcement of a state enactment upon the ground of
its "unconstitutionality." The reference undoubtedly is to an
asserted conflict with the federal Constitution, and the question
of unconstitutionality in this sense must be a substantial one.
But, where such a question is presented, the application is within
the provision, and, this being so, it cannot be supposed that it
was the intention of Congress to compel the exclusion of other
grounds, and thus to require a separate motion for preliminary
injunction, and a separate hearing and appeal, with respect to the
local questions which are involved in the case, and would properly
be the subject of consideration in determining the propriety of
granting an injunction pending suit. The local questions arising
under the state constitution and statutes were therefore before the
circuit court, and the appeal brings them here. They may be first
1. It is objected that the Act of March 10, 1900, violates §§
27, 28, 109, and 135 of the state constitution [Footnote 2
] by undertaking
Page 231 U. S. 305
to confer judicial powers upon the Commission. By these
sections, provision is explicitly made for three distinct
departments of government; the judicial power of the commonwealth
is vested in the courts established by the Constitution, and no
judicial power can be exercised by any other officer except those
thus named unless authorized by some other provision of that
instrument. Roberts v. Hackney,
109 Ky. 265, 268;
Pratt v. Breckinridge,
112 Ky. 1.
So far as we are advised, the Court of Appeals of Kentucky has
not passed upon the validity of the act in question, and this Court
has often expressed its reluctance to adjudge a state statute to be
in conflict with the Constitution of the state before that question
has been considered by the state tribunals -- to which it properly
belongs -- unless the case imperatively demands such a decision.
Pelton v. National Bank, 101 U. S. 143
101 U. S. 144
Michigan Central R. Co. v. Powers, 201 U.
, 201 U. S. 291
Here, the argument against the statute is not of that compelling
It has frequently been pointed out that prescribing rates for
the future is an act legislative, and not judicial, in kind.
Interstate Commerce Commission v. C., N. O. & T. P. Ry.
Co., 167 U. S. 479
167 U. S. 499
McChord v. Louisville & Nashville R. Co., 183 U.
, 183 U. S. 495
Prentis v. Atlantic Coast Line Co., 211 U.
, 211 U. S. 226
Knoxville v. Knoxville Water Co., 212 U. S.
, 212 U. S. 8
pertains, broadly speaking, to the legislative power. The
legislature may act directly or, in the absence of constitutional
restriction, it may commit the authority to fix rates to a
subordinate body. Stone v. Farmers' Loan & Trust Co.,
116 U. S. 307
116 U. S. 336
Reagan v. Farmers' Loan & Trust Co., 154 U.
, 154 U. S.
-394,; Atlantic Coast Line v. North Carolina
Corporation Commission, 206 U. S. 1
206 U. S. 19
Honolulu Rapid Transit & Land Co. v. Hawaii,
211 U. S. 282
211 U. S. 291
Grand Trunk Ry. Co. v.
Page 231 U. S. 306
U.S. 400, 221 U. S. 403
The Railroad Commission of Kentucky was established by § 209 of the
Constitution (adopted in the year 1891), which provided that "the
powers and duties of the railroad Commissioners shall be regulated
by law," and that,
"until otherwise provided by law, the Commission so created
shall have the same powers and jurisdiction, perform the same
duties, be subject to the same regulations, and receive the same
compensation, as now conferred, prescribed, and allowed by law to
the existing railroad Commissioners;"
and by § 218, of the same instrument (the long and short haul
provision) the Commission was authorized "in special cases, after
investigation," to permit a less charge for longer than for shorter
distances, and to "prescribe the extent" to which the common
carrier might be "relieved from the operations" of the section.
Louisville & Nashville R. Co. v. Commonwealth,
63; 183 U. S. 183
503. It is unnecessary to review the statutes defining the powers
of the then-existing Commission, to which § 209 refers (General
Statutes of Kentucky, ed. 1888, pp. 1021 et seq.;
March 7, 1890, 1 Acts 1889-90, p. 25). For, while the former
commission had not been authorized to fix rates, it can hardly be
doubted that the Constitution, in providing that the powers and
duties of the new commission should be regulated by law,
contemplated that it should be available as an appropriate
instrument in the supervision and regulation of railroads, and left
the legislature free to adopt, if it saw fit, a practice already
familiar (Interstate Commerce Commission v. C., N. O. & T.
P. Ry. Co., 167 U. S. 479
167 U. S.
-496), and to call this agency to its aid in
prescribing reasonable intrastate rates. This authority the
legislature granted by the Act of March 10, 1900, empowering the
Commission where, as in this case, particular rates were found to
be exorbitant to fix the reasonable rates thereafter to be charged.
Siler v. Louisville & Nashville R. Co., 213 U.
, 213 U. S.
Page 231 U. S. 307
The contention is that, before the Commission makes such an
order, it is required to exercise judicial functions. It is first
to determine whether the carrier has been exacting more than is
just and reasonable; it is to give notice and a hearing; it is to
"hear such statements, arguments, or evidence offered by the
parties" as it may deem relevant, and it is in case it determines
that the carrier is "guilty of extortion" that it is to prescribe
the just and reasonable rate. Still, the hearing and determination,
viewed as prerequisite to the fixing of rates, are merely
preliminary to the legislative act. To this act the entire
proceeding led, and it was this consequence which gave to the
proceeding its distinctive character. Very properly, and it might
be said, necessarily -- even without the express command of the
statute -- would the Commission ascertain whether the former, or
existing, rate, was unreasonable before it fixed a different rate.
And in such an inquiry, for the purpose of prescribing a rule for
the future, there would be no invasion of the province of the
judicial department. Even where it is essential to maintain
strictly the distinction between the judicial and other branches of
the government, it must still be recognized that the ascertainment
of facts, or the reaching of conclusions upon evidence taken in the
course of a hearing of parties interested, may be entirely proper
in the exercise of executive or legislative, as distinguished from
judicial, powers. The legislature, had it seen fit, might have
conducted similar inquiries through committees of its members, or
specially constituted bodies, upon whose report as to the
reasonableness of existing rates it would decide whether or not
they were extortionate and whether other rates should be
established, and it might have used methods like those of judicial
tribunals in the endeavor to elicit the facts. It is "the nature of
the final act" that determines "the nature of the previous
inquiry." Prentis v. Atlantic Coast Line, 211 U.
, 211 U. S.
Page 231 U. S. 308
It is also urged in support of the objection that the order of
the Commission is to be "in full force and effect" at the
expiration of ten days after notice, and that this is the
equivalent of a declaration that the order shall be final and
conclusive; but the finality of the act did not change its
essential character. So far as it was final unless revoked or
modified by the Commission, it was final as a legislative act
within the Commission's authority.
2. It is contended that the Commission acted arbitrarily. We are
referred to the allegations of the bill that there was "no
testimony" before the Commission "that did establish or that tended
to establish" the unjust or unreasonable nature of any of the rates
maintained by the appellant, that there was "no evidence"
introduced in the investigation or considered by the Commission
"showing or tending to show" that the appellant's rates were, "in
and of themselves, unjust, unreasonable, or extortionate," that the
evidence "had no proper relation" to the reasonableness of rates
for transporting the commodities in question when they were to be
used for distillery purposes, and that
"no evidence whatsoever was adduced at the hearing and
investigation aforesaid, which showed or tended to show in the
slightest degree what was or might be a just or reasonable rate to
for the transportation described in the Commission's order.
But it appears that, upon receiving the complaint of the
distillers with respect to the rates which the appellant had put
into effect, the Commission set the matter for hearing; that the
parties were heard; that each party produced a number of witnesses,
and that the appellant, represented by counsel, was permitted to
cross-examine the witnesses of the complainants. The rates as fixed
by the Commission were the same as those which for many years had
been maintained by the appellant for the distillers' supplies. The
evidence taken by the Commission was not before the court below,
and the general allegations of
Page 231 U. S. 309
the bill, which in substance stated the judgment of the pleader
as to what such evidence did not "establish" or "tend to
establish," and the statements contained in the affidavits
submitted upon the application for injunction, were utterly
insufficient to justify the court in enjoining the rates upon the
ground that the Commission either had denied the hearing which the
statute contemplated, or by its arbitrary action had been guilty of
an abuse of power.
It is also charged, invoking a doctrine analogous to that
declared in Southern Pacific Co. v. Interstate Commerce
Commission, 219 U. S. 433
that the Commission assumed a power which it did not possess by
proceeding upon the theory of a supposed equitable estoppel in
favor of the distillers because they had been induced to erect and
extend their plants upon the faith of the former rates. This
contention finds no support in the record. The Commission purported
to act under its statutory authority, and, finding the rates
charged by the carrier to be extortionate, fixed other rates which
they declared to be reasonable.
Again, it is further said that the enforcement of the rate order
should have been enjoined in order to prevent unjust
discriminations and undue preferences in contravention of §§ 817
and 818 of the Kentucky statutes. Section 817 prohibits unjust
discrimination in charges, as between persons, for like and
contemporaneous service in transportation. Section 818 makes it
unlawful to give any undue or unreasonable preference or advantage
to one person or locality as compared with another. Section 819
prescribes penalties for violation, the prosecution to be by
indictment. The point of this objection is that obedience to the
Commission's order with respect to the traffic from the three
places of origin to the sixteen places of destination therein
mentioned will bring about discrimination in intrastate rates,
contrary to these statutes, as against thirty-two other distillery
stations on the lines
Page 231 U. S. 310
of the appellant, the distillers at which, so far as appears,
have not complained of the appellant's rates.
In view of the decision in Commonwealth v. Louisville &
Nashville R. Co.,
20 Ky. 491, to the effect that the
provisions of § 818 are too uncertain to support a criminal
proceeding under § 819, it is not contended by the appellant that
it would be subject to the prescribed penalties so far as § 818 is
concerned. And it is urged by the attorney general of the state, on
behalf of the appellees, that § 817 does not apply to
discrimination as between localities.
But, aside from these considerations, we find the objection to
be without merit. The Commission dealt with the question before it,
and, on complaint as to the rates to the sixteen points of
destination, ordered what it found to be reasonable rates for that
transportation. In so doing, it acted in conformity with the
statute. To give legality to its order as to the particular rates
in question, it was not necessary for the Commission to require a
reduction in other rates. Certainly the fact that the other rates
described, which had not yet been passed upon by the Commission,
might likewise be open to the objection of unreasonableness, and
that their maintenance by the appellant might lead to unjust
discrimination, would furnish no basis for restraining the
enforcement of the Commission's order if that order were otherwise
3. The order is further attacked upon the ground that the
statute under which it was made operates to deprive the carrier of
its property without due process of law and to deny to it the equal
protection of the laws, contrary to the Fourteenth Amendment.
It is insisted that the failure to provide for an appeal to any
court from the final order of the Commission, or for a judicial
review of the reasonableness of the prescribed rates before they
become effective, makes the statute
Page 231 U. S. 311
void. But the statute does not deny to the carrier the right of
access to the courts for the purpose of determining any matter
which would be the appropriate subject of judicial inquiry. We have
not been referred to any decision of the state court holding that
the statute should be so construed (Chicago &c. Railway v.
Minnesota, 134 U. S. 418
134 U. S.
). If the Commission establishes rates that are so
unreasonably low as to be confiscatory, an appropriate mode of
obtaining relief is by bill in equity to restrain the enforcement
of the order. Chicago &c. Railway v. Minnesota,
134 U. S. 418
134 U. S.
-460; St. Louis & San Francisco Ry. Co. v.
Gill, 156 U. S. 649
156 U. S. 659
156 U. S. 666
Ex Parte Young, 209 U. S. 123
209 U. S. 166
Presumably the courts of the state, as well as the federal courts,
would be open to the carrier for this purpose (Home Telephone
Co. v. Los Angeles, 211 U. S. 265
211 U. S. 278
without express statutory provision to that effect. In answer to
the present objection, it is sufficient to say that there is no
showing here of an attempt to preclude such resort to the courts,
or to deny to the carrier the assertion of its rights, unless it
can be found in the severity of the penalties attached to
disobedience of the order. And if it were assumed that these would
be open to objection as operating to deprive the carrier of a fair
opportunity to contest the validity of the Commission's action,
still, the penal provisions would be separable, and the force of
the remaining portion of the statute would not be impaired.
Reagan v. Farmers' Loan & Trust Co., 154 U.
, 154 U. S. 395
Willcox v. Consolidated Gas Co., 212 U. S.
, 212 U. S. 53
Grenada Lumber Co. v. Mississippi, 217 U.
, 217 U. S. 443
Western Union Telegraph Co. v. Richmond, 224 U.
, 224 U. S. 172
Minnesota Rate Cases, 230 U. S. 352
230 U. S. 380
Southern Pacific Co. v. Campbell, 230 U.
, 230 U. S. 553
4. The appellant, however, submits a broader contention which
concerns the scope of the review to which it is entitled in this
suit, and the nature of the judicial function
Page 231 U. S. 312
where rates fixed by the legislature, or under its direction,
are assailed as unreasonable.
It is urged that, so long as a carrier's existing rates are just
and reasonable for the services it performs, it is within its
constitutional and statutory rights; that what constitutes a just
and reasonable rate for the services it has performed is a question
of fact upon which the carrier is entitled to a judicial hearing;
that even more clearly is it entitled to such a hearing, if, as a
consequence of a decision by the Commission that it has exceeded
the limits of just and reasonable compensation for past services,
"must forfeit in favor of such statutory body its ratemaking
power, and be deprived of that property right with respect to 'like
services thereafter rendered,' as provided in the McChord Act."
It is said further that, under the statute, the finding from the
evidence that the carrier has charged more than a reasonable
compensation is "the essential jurisdictional fact" which must
exist before the Commission can fix rates, and it is insisted that
if, upon a judicial investigation and the evidence adduced by the
parties, it turns out that this jurisdictional fact did not exist,
then the Commission's entire action must be regarded as null and
void without regard to the question whether the new rates
prescribed by it in such circumstances are reasonable or
unreasonable, compensatory or confiscatory. It is therefore
contended that the appellant is now entitled to a judicial hearing
upon the questions of fact as to the reasonableness of the
particular rates existing at the time the order was made, as well
as of those fixed by the Commission, and that in this view the
injunction asked for should have been granted.
These arguments are elaborated and earnestly pressed, but the
questions presented have been so frequently dealt with by this
Court that an extended discussion is unnecessary. The right of the
carrier to make its own intrastate rates is subject to the law of
the state, constitutionally
Page 231 U. S. 313
enacted. In the absence of a legislative rate, it is the
province of the courts in deciding cases that arise between
shippers and carriers to pass upon the reasonableness of the
compensation which the carrier has demanded for its services. In so
doing, the courts apply the common law. But it is the province of
the legislature to make the law, and when the legislature or the
body acting under its authority establishes the rate to be
thereafter charged by the carrier, it is the duty of the courts to
enforce the rule of law so made unless the constitutional limits of
the ratemaking power have been transgressed. The ratemaking power
necessarily implies a range of legislative discretion, and, so long
as the legislative action is within its proper sphere, the courts
are not entitled to interpose and upon their own investigation of
traffic conditions and transportation problems to substitute their
judgment with respect to the reasonableness of rates for that of
the legislature or of the Railroad Commission exercising its
delegated power. It may be assumed that the statute of Kentucky
forbade arbitrary action; it required a hearing, the consideration
of the relevant statements, evidence, and arguments submitted, and
a determination by the Commission whether the existing rates were
excessive. But, on these conditions' being fulfilled, the questions
of fact which might arise as to the reasonableness of the existing
rates in the consideration preliminary to legislative action would
not become, as such, judicial questions to be reexamined by the
courts. The appropriate questions for the courts would be whether
the Commission acted within the authority duly conferred by the
legislature, and also, so far as the amount of compensation
permitted by the prescribed rates is concerned, whether the
Commission went beyond the domain of the state's legislative power
and violated the constitutional rights of property by imposing
confiscatory requirements. Stone v. Farmers' Loan & Trust
Co., 116 U. S. 307
116 U. S.
Page 231 U. S. 314
Reagan v. Farmers' Loan & Trust Co., 154 U.
, 154 U. S.
-399; Smyth v. Ames, 169 U.
, 169 U. S. 526
San Diego Land & Town Co. v. National City,
174 U. S. 739
174 U. S. 754
San Diego Land & Town Co. v. Jasper, 189 U.
, 189 U. S. 446
Knoxville v. Knoxville Water Co., 212 U. S.
, 212 U. S. 8
212 U. S. 17
Willcox v. Consolidated Gas Co., 212 U. S.
9, 212 U. S. 41
Minnesota Rate Cases, 230 U. S. 352
230 U. S.
-434. Undoubtedly a state may permit appeals to its
courts from the ratemaking orders of its railroad Commission, and,
upon the review of such orders, it may expressly authorize its
judicial tribunals to investigate and decide questions which
otherwise would not belong to them, or even to act legislatively
(Prentis v. Atlantic Coast Line, supra
). But the
guaranties of the Fourteenth Amendment do not entitle the carrier
to the exercise by the courts of such extrajudicial authority.
5. With respect to the question of confiscation, the circuit
court ruled that the bill did not "clearly tender an issue that
could be said to involve confiscatory rates." The court also
referred in its opinion to the statement in the brief of
complainant's counsel that the complainant was not bound in this
case "to allege or prove that the new rates were confiscatory," and
also to an oral disclaimer of a purpose to rely upon any such
contention. "This concession," the court said,
"we think, was but natural, in view of the history of the rates
which the railroad company voluntarily maintained for years prior
to March 25, 1910, as before pointed out. No averment is made
touching the proportions in volume of distillers' traffic and of
nondistillers' traffic, and it could not be assumed that the
company had been carrying distillers' supplies and products at
confiscatory rates, nor that the extension of those rates to all
similar traffic on the lines in question would amount to the
confiscation of property."
186 F. 176, 191.
It is explained by the appellant that what was conceded
Page 231 U. S. 315
below was that the bill as amended did not aver that the rates
fixed by the Commission would result in the confiscation of
appellant's property on its entire intrastate business, but that it
is insisted, and was insisted below, that the rates would not yield
a fair or reasonable compensation for the services performed, and
would deprive the company of the fair and reasonable return which
it is entitled to earn upon the property devoted to such services
with respect to the described traffic.
Without passing upon the general propositions advanced in
argument, it suffices to say that we are of the opinion that the
bill as amended wholly failed to make a case entitling the
appellant to the relief sought. Apart from the merely general
averments, it is alleged that the rates fixed by the order would
cause an annual loss in revenue on intrastate freight of at least
$15,600, and also that, in consequence of the effect on interstate
rates, there would be an additional annual loss of not less than
$3,000; further, that, if the carrier were compelled to put in
similar rates to the thirty-two other distillery stations, there
would be a loss of $54,000 a year on shipments to those places, and
that there would be other losses to an amount not specified on
shipments to consignees other than distillers.
But it may be supposed that, other conditions being the same, a
reduction in rates found to be excessive will cause a loss in
revenue, and the question is not simply as to the amount of
reduction, but whether the rates as fixed would allow a fair
return. The bill does not show the value of the property employed,
the expenses of operation, or the return which would be permitted
under the rates prescribed.
6. It is further objected that the ratemaking order impairs the
obligation of the contract contained in the company's charter in
violation of § 10, Article I of the federal Constitution. It is
alleged in the amended bill that, by its charter granted by the act
approved March 5,
Page 231 U. S. 316
1850, and the amendments thereto, the appellant was authorized
transportation over its lines, and that the transportation over its
lines, and that the rates fixed by the Commission's order are less
than those which it was thus empowered to maintain.
It is provided by § 3 of the Bill of Rights contained in the
state constitution adopted in 1891, that "every grant of a
franchise, privilege, or exemption shall remain subject to
revocation, alteration, or amendment." Section 190 of this
constitution is as follows:
"No corporation in existence at the time of the adoption of this
Constitution shall have the benefit of future legislation without
first filing in the office of the Secretary of State an acceptance
of the provisions of this Constitution."
It is set forth in the amended bill that, by resolution of the
board of directors of the appellant, adopted July 11, 1902, it
"duly accepted the provisions of the present Constitution of the
Commonwealth of Kentucky, ordained September 28, 1891, and the
provisions of Chapter 32 of the Kentucky Statutes, being the act
adopted April 5, 1893, with the amendments thereto,"
and that a copy of this resolution was filed with the Secretary
of the State of Kentucky. Chapter 32 of the General Statutes is the
chapter upon private corporations. One of its provisions, contained
in § 573, is that the
"provisions of all charters and articles of incorporation,
whether granted by special act of the General Assembly or obtained
under any general incorporation law, which are inconsistent with
the provisions of this chapter concerning similar corporations, to
the extent of such conflict, and all powers, privileges, or
immunities of any such corporation which could not be obtained
under the provisions of this chapter, shall stand repealed on
September 28, 1897. . . . After the 28th day of September, 1897,
the provisions of this chapter shall apply to all corporations
created or organized under the laws of this state, if said
Page 231 U. S. 317
would be applicable to them if organized under this
By another provision of this chapter, in the article relating to
railroads (§ 816), a railroad corporation charging more than a just
and reasonable rate of compensation is guilty of extortion; the
penalty was a fine provided for in § 819. In Louisville &
Nashville R. Co. v. Commonwealth,
99 Ky. 132 the Court of
Appeals, holding that § 816 was too indefinite to be sustained as a
penal statute, concluded its opinion by saying:
"It may be observed further, however, that it would seem
singular if such a statute, even if in all respects valid, could be
enforced against a carrier whose rates, as fixed in its charter,
are in excess of the rates alleged to be excessive in the
indictment. And this not because such rates are secured by an
irrepealable contract (a matter not now considered), but simply
because they at least remain the legal rates until changed by
It was after the decision in this case that the Act of March 10,
1900, was passed, empowering the railroad Commission to fix
The amended bill states that, upon the filing of the resolution
accepting the provisions of the constitution, and the provisions of
Chapter 32 of the General Statutes,
"thereby and thereafter the said contract (with respect to the
maximum freight and passenger rates it is entitled to charge and
collect on its said lines of railroad) between complainant and the
Commonwealth of Kentucky became and is now no longer irrevocable or
but, it is averred that "nevertheless, said contract remains
intact, and has never been revoked or repealed by any act of the
legislature," and that its obligation was in full force and effect
at the time the rate order was made (August 10, 1910). That is, it
is insisted that § 573 of the statutes, above quoted, is not
applicable for the reason that, on April 5, 1893, when the statute
of which this provision was a part was approved, and also on
Page 231 U. S. 318
28, 1897, when the repeal provided for in that statute was to
take effect, the appellant's charter was not subject to repeal or
amendment, and that it did not become so subject until 1902. It is
also contended that the act authorizing the Commission to fix rates
does not apply, because that was passed two years before the
appellant filed its resolution -- in other words, that its contract
contained in its charter is still in force because the legislature
has not enacted a repealing or amending provision since the
resolution was filed.
We do not find it necessary to review all the questions that are
suggested. Apart from other considerations, it is manifest that the
statute of March 10, 1900, was a continuing authority to the
Railroad Commission. The order of the Railroad Commission in fixing
rates was a legislative act under its delegated power. It had "the
same force as if made by the legislature." Grand Trunk Ry. Co.
v. Railroad Commission, 221 U. S. 400
221 U. S. 403
It is for this reason that it is a "law" passed by the state,
within the meaning of the contract clause. New Orleans Water
Works Co. v. Louisiana Sugar Refining Co., 125 U. S.
, 125 U. S. 31
St. Paul Gas Light Co. v. St. Paul, 181 U.
, 181 U. S. 148
Northern Pacific Ry. Co. v. Minnesota, 208 U.
, 208 U. S. 590
Grand Trunk Ry. Co. v. Railroad Commission, supra; Ross v.
Oregon, 227 U. S. 150
227 U. S. 163
As it had full legislative effect, the appellant could not assert
against its operation the provision of a contract which had
previously become subject to legislative alteration. Missouri
Pacific Ry. Co. v. Kansas, 216 U. S. 262
216 U. S.
-275. Upon the filing of the resolution, the charter
provision as to the maximum rates therein specified ceased to be an
obstacle, if it had been such before, to the exercise by the state
of its ratemaking power.
7. The remaining questions require only a brief mention. The
penalty provisions of the statute in question are challenged upon
the ground that they violate the
Page 231 U. S. 319
provisions of the Fourteenth Amendment. But, as already stated,
these provisions are separable. It is also objected that the order
of the Commission constitutes an unwarrantable interference with,
and a regulation of, interstate commerce. The questions thus raised
cannot be distinguished from those which were considered and
decided in The Minnesota Rate Cases, 230 U.
The order for reparation.
This order was not made under the statute of March 10, 1900,
authorizing the Commission to fix rates. It is conceded on behalf
of the appellees that, if the Commission was not authorized by §§
821 or 829 of the Kentucky statutes to award reparation, it had no
authority whatever for that purpose. Section 821 provides that it
shall be the duty of the Railroad Commissioners to see that the
laws relating to railroads are faithfully executed, and to exercise
a general supervision over the railroads of the state. Section 829
authorizes the Commission to "hear and determine complaints" under
§§ 816, 817, and 818, to the provisions of which we have already
referred. It provides that such complaints shall be in writing,
that the company complained of shall have notice of hearing, that
the Commission shall hear and reduce to writing all the evidence
adduced, and that it shall render such award as may be proper. If
the award be not satisfied within ten days, the chairman of the
Commission is to file a copy of it and the evidence heard in the
office of the clerk of the proper circuit court, whereupon it is to
be docketed for trial, and summons is to be issued, as in other
cases, requiring the party against whom the award has been made to
show cause why it should not be satisfied. If the party fails to
appear, judgment is to be rendered by default, and, if a trial is
demanded, the case is to be tried as other ordinary cases, except
that no evidence is to be introduced by either party save that
heard before the Commission, unless the court shall be satisfied by
sworn testimony that
Page 231 U. S. 320
it could not have been produced before the Commission by the
exercise of reasonable diligence.
It thus appears that the two proceedings, though they were
conducted at the same time, were distinct in their nature. The one
resulted in a legislative rule for the future; in the other, there
was an award of specific sums of money to particular persons upon
the basis of past transactions, and this award, according to the
provisions of the statute, on being filed, could be enforced by
proceedings in the courts of the state. The persons in whose favor
the award was made were not parties to the suit, and we think that
the court was right in declining to determine its validity.
The order denying the application for injunction is
* Original docket title Louisville & Nashville Railroad Co.
v. Siler et al.,
constituting the Railroad Commission of
This statute is set forth in full in McChord v. L. & N.
R. Co., 183 U. S. 483
183 U. S. 485
and in Siler v. L. & N. R. Co., 213 U.
, 213 U. S.
The provisions referred to are as follows:
"SECTION 27. The powers of the government of the Commonwealth of
Kentucky shall be divided into three distinct departments, and each
of them be confined to a separate body of magistracy, to-wit, those
which are legislative to one; those which are executive to another,
and those which are judicial to another."
"SECTION 28. No person, or collection of persons, being of one
of those departments, shall exercise any power properly belonging
to either of the others, except in the instances hereinafter
expressly directed or permitted."
"SECTION 109. The judicial power of the commonwealth, both as to
matters of law and equity, shall be vested in the senate when
sitting as a court of impeachment, and one Supreme Court (to be
styled the Court of Appeals), and the courts established by this
"SECTION 135. No courts save those provided for in this
Constitution shall be established."