Whether the statutes of Maryland intend to authorize the Public
Service Commission to revise intrastate commutation rates when such
rates have already been established by voluntary action of the
railroad company, is a question of state law concerning which the
conclusion of the Court of Appeals of Maryland binds this Court
upon a writ of error to review its judgment.
State regulation, through a public service commission, requiring
a carrier to maintain commutation service between points within the
state and fixing rates therefor which are less than the intrastate
rate lawfully established for one-way intrastate travel in general,
does not deprive the carrier of due process of law when the service
so regulated was established by the carrier voluntarily and the
rates fixed by the state are reasonable.
Lake Shore &
Michigan Southern Ry. Co. v. Smith, 173 U.
S. 684, is distinguished, and the views expressed in
that case which are inconsistent with the decision in this one are
disapproved.
126 Md. 59 affirmed.
The case is stated in the opinion.
Page 245 U. S. 7
MR. JUSTICE DAY delivered the opinion of the Court.
This was an action in the Circuit Court No. 2 of Baltimore City,
Maryland, to enjoin the Public Service Commission of Maryland from
enforcing an order to sell commutation tickets at certain rates
specified. The injunction was refused, and on appeal the Court of
Appeals of Maryland affirmed the decree and held that, although the
order fixing the rates declared the same to be
Page 245 U. S. 8
in force for ten years, there should be reserved to the railroad
company the right to apply to the Commission after the lapse of a
reasonable time for a rescission or modification of its order if
experience demonstrated that the revenue derived under the tariff
as established by the Commission was not properly compensatory for
the services performed. 126 Md. 59.
The order of the Commission required the Pennsylvania Railroad
Company, lessee of the Northern Central Railway, to sell tickets
for the transportation of passengers between Baltimore and Parkton
within the State of Maryland on the line of the Northern Central
Railway.
A table appearing in the opinion of the Court of Appeals shows
the relative rates under the former schedules and the new order of
the Public Service Commission to be as follows:
bwm:
Rates Prior to Rates as per schedule Rates under Order
Nov. 25, 1914 Filed Nov. 25, 1914 P.S.Com.
Dec. 23, 1914
1. Round trip, 10-day, Round trip, no limit, Round trip, 2
1/4�
2 1/4� per M 2 1/2� per M per M
2. Exc. 2-10 days, Discontinued No ruling made
2 1/4� per M
3. 10-trip ticket, 1 yr. 10-trip, 3 mos., 2 1/4� 10-trip, 3
mos.,
yr., 1 8/10� per M per M 2� per M
4. 60-trip 1 mo., 2� for 60-trip, 1 mo. former 60-trip, 1 mo.
former
first 3 M, 1/4� for rate plus 25� flat rate plus 25�
ea. addl. 1/2 M
5. 100-trip 1 yr. at Discontinued 100-trip, 4 mos.,
double 60-trip. former rate, plus $1
6. 180-trip 3 mos. same 180-trip, 3 mos. at 3 180-trip, 3
mos.,
as 4, less 10% times 60-trip former rate plus 75�
7. 46-trip School, 1 mo., 46-trip School, 1 mo., 46-trip School,
1 mo.,
46/60 of 60-trip 46/60 of 60-trip 46/60 of 60-trip
ewm:
The attack upon the order of the Commission in this Court is
based upon the contention that its effect is to take the property
of the railroad company without due process of law, contrary to the
Fourteenth Amendment to
Page 245 U. S. 9
the Constitution of the United States. It is also averred in the
bill that the order, if enforced, will work a discrimination
against interstate travel in favor of travel within the state, and
is otherwise unreasonable and void.
The Court of Appeals of Maryland stated the question to be
whether it is within the power of the Public Service Commission to
require the establishment of a schedule of commutation rates by the
railroad company, not where no such rates had therefore been
established, but where a new system of commutation rates had been
proposed by the railroad company and submitted to the Commission.
Whether commutation rates should be established was declared to be
a question of policy to be decided by the company. The court found
authority in the Commission under the statutes of Maryland to
revise commutation rates where such rates had already been
established by the action of the company. We must accept this
definition of authority in the Commission, so far as the state law
is concerned, and direct our inquiry to the federal question
presented.
The question, as counsel for plaintiff in error states it, is
whether a state legislature, either directly or through the medium
of a Public Service Commission, under the guise of regulating
commerce, may compel carriers engaged in both interstate and
intrastate commerce to establish and maintain intrastate rates at
less than both the interstate and intrastate standard and legally
established maxima. It is asserted that there is no constitutional
authority to compel railroad companies to continue the sale of
commutation or special class tickets at rates less than the legally
established standard or normal one-way single passenger fare upon
terms more favorable than those extended to the single one-way
traveler.
To maintain this proposition, plaintiff in error relies upon and
quotes largely from the opinion of this Court in
Lake
Shore & Michigan Southern Ry. Co. v. Smith,
173
Page 245 U. S. 10
U.S. 684. In that case, a majority of this Court held a statute
of the State of Michigan to be invalid. A previous statute of the
state had fixed a maximum passenger rate of three cents per mile.
The statute in controversy required the issuing of mileage books
for a thousand miles, good for two years at a less rate. This Court
held that a maximum rate for passengers having been established,
that rate was to be regarded as the reasonable compensation for the
service, and that the fixing of the less rate to particular
individuals was an arbitrary exercise of legislative power and an
unconstitutional interference with the business of the carrier, the
effect of which was to violate the provisions of the Fourteenth
Amendment to the federal Constitution by depriving the railroad
company of its property without due process of law and denying to
it the equal protection of the law.
The
Lake Shore case did not involve, as does the
present one, the power of a state commission to fix intrastate
rates for commutation tickets where such rates had already been put
in force by the railroad company of its own volition, and we
confine ourselves to the precise question presented in this case,
which involves the supervision of commutation rates when rates of
that character have been voluntarily established by the carrier.
The rates here involved are wholly intrastate. The power of the
states to fix reasonable intrastate rates is too well settled at
this time to need further discussion or a citation of authority to
support it.
In
Interstate Commerce Commission v. Baltimore & Ohio R.
Co., 145 U. S. 263,
this Court held that a "party rate ticket" for the transportation
of ten or more persons at a less rate than that charged a single
individual did not make a discrimination against an individual
charged more for the same service or amount to an unjust or
unreasonable discrimination within the meaning of the act to
regulate commerce. In the course of the opinion, the
Page 245 U. S. 11
right to issue tickets at reduced rates good for limited periods
upon the principle of commutation was fully recognized.
See pp.
145 U. S.
277-280.
Having the conceded authority to regulate intrastate rates, we
perceive no reason why such power may not be exercised through duly
authorized commissions and rates fixed with reference to the
particular character of the service to be rendered.
In
Norfolk & Western Ry. v. West Virginia,
236 U. S. 605,
236 U. S. 608,
after making reference to
Northern Pacific Ry. v. North
Dakota, 236 U. S. 585,
this Court said:
"It was recognized [in the
North Dakota case] that the
state has a broad field for the exercise of its discretion in
prescribing reasonable rates for common carriers within its
jurisdiction; that it is not necessary that there should be uniform
rates or the same percentage of profit on every sort of business,
and that there is abundant room for reasonable classification and
the adaptation of rates to various groups of services."
That the state may fix maximum rates governing one-way passenger
travel is conceded. Having the general authority to fix rates of a
reasonable nature, we can see no good reason for denying to the
state the power to exercise this authority in such manner as to fix
rates for special services different from those charged for the
general service. In our opinion, the rate for a single fare for
passengers generally may be varied so as to fit the particular and
different service which involves, as do commutation rates, the
disposition of tickets to passengers who have a peculiar relation
to the service. The service rendered in selling a ticket for one
continuous trip is quite different from that involved in disposing
of commutation tickets where a single ticket may cover 100 rides or
more within a limited period. The labor and cost of making such
tickets, as well as the cost of selling them, is less than
Page 245 U. S. 12
is involved in making and selling single tickets for single
journeys to one-way passengers.
The service rendered the commuter, carrying little baggage and
riding many times on a single ticket for short distances, is of a
special character, and differs from that given the single-way
passenger.
It is well known that there have grown up near to all the large
cities of this country suburban communities which require this
peculiar service, and as to which the railroads have themselves, as
in this instance, established commutation rates. After such
recognition of the propriety and necessity of such service, we see
no reason why a state may not regulate the matter, keeping within
the limitation of reasonableness.
On the strength of these commutation tariffs, it is a fact of
public history that thousands of persons have acquired homes in
city suburbs and nearby towns in reliance upon this action of the
carriers in fixing special rates and furnishing particular
accommodations suitable to the traffic. This fact has been
recognized by the courts of the country, by the Interstate Commerce
Commission, and quite generally by the Railroad Commissions of the
states.
*
The question of the power of the Public Service Commission of
the State of New York in this respect was before the Appellate
Division of the supreme court of
Page 245 U. S. 13
that state in
People ex rel. New York, New Haven &
Hartford Railroad Co. v. Public Service Commission, 159
App.Div. 531. In that case, it was said:
"Subdivision 4 of § 33 of the Public Service Commissions Law
(Consol.Laws, c. 48 [Laws of 1910, c. 480], as amended by Laws of
1911, c. 546) empowers the Commission to fix reasonable and just
rates for such service. It is urged, however, that the statute is
invalid under the rule of
Lake Shore, etc., R. Co. v.
Smith, 173 U. S. 684. In that case, the
statute of Michigan had fixed a maximum passenger rate at three
cents per mile. A subsequent enactment required the issuing of
mileage books for 1,000 miles, good for two years at a less rate.
The Court held that, having fixed a uniform maximum rate as to all
passengers, such rate was the reasonable compensation for the
service, and that the fixing of a less rate to particular
individuals was an unreasonable and arbitrary exercise of
legislative power; that it was not for the convenience of the
public, and thus within the police power, but was for the
convenience of certain individuals who were permitted to travel
upon the railroads for less than the reasonable rate prescribed by
law; that the law was therefore in violation of the Fourteenth
Amendment of the federal Constitution in depriving the company of
its property without due process of law and by depriving it of the
equal protection of the laws."
"In
Beardsley v. N.Y. L. E. & W. R. Co., 162 N.Y.
230, the Court of Appeals felt constrained by the
Smith
case to declare the Mileage Book Law of this state invalid as to
companies in existence at the time of its passage, but in
Purdy
v. Erie R. Co., 162 N.Y. 43, that law was held valid as to
companies organized after the statute was passed."
"In
Louisville & Nashville R. Co. v. Kentucky,
183 U. S.
503, after citing the
Smith case and like
cases, the Court says (at p.
183 U. S.
511): 'Nor, yet, are we ready to carry the
Page 245 U. S. 14
doctrine of the cited cases beyond the limits therein
established.'"
"In the
Minnesota Rate Case (Simpson v. Shepard),
230 U. S.
352, the legality of an order of the Commission of that
state was recognized which fixed a maximum freight rate and
passenger rate, the latter at two cents a mile as the maximum fare
for passengers twelve years of age or over, and one cent a mile for
those under twelve years of age."
"In
Interstate R. Co. v. Massachusetts, 207 U. S.
79, the Massachusetts law prescribing special rates less
than the maximum for school children was held valid. These cases
indicate that the
Smith case is not to be extended beyond
the facts upon which it rests."
"The
Smith case distinguishes itself from this case
where the Court (at p.
173 U. S. 693) says:"
"This act is not like one establishing certain hours in the day
during which trains shall be run for a less charge than during the
other hours. In such case, it is the establishing of maximum rates
of fare for the whole public during those hours, and it is not a
discrimination in favor of certain persons by which they can obtain
lower rates by purchasing a certain number of tickets by reason of
which the company is compelled to carry them at the reduced rate,
and thus, in substance, to part with its property at a less sum
than it would be otherwise entitled to charge. The power to compel
the company to carry persons under the circumstances as provided
for in this act for less than the usual rates does not seem to be
based upon any reason which has hitherto been regarded as
sufficient to authorize an interference with the corporation,
although a common carrier and a railroad."
"Our flourishing cities owe their position and prosperity, in
part, to the commutation rates for suburban service; the health and
welfare of the public are concerned that people doing business in
the large cities may live in the
Page 245 U. S. 15
country where the surroundings are pleasanter, more healthy, and
to the advantage of themselves and their families. It is a known
fact that such rates exist upon all railways entering large cities,
and have usually been established by the companies voluntarily in
the interest of themselves and the public. The service is different
in its nature from the other passenger service. It is so universal,
of such large proportion, has become so necessary to the public
that it cannot be said that the fixing of reasonable and just rates
for it is unusual or unreasonable, or the granting of a benefit to
individuals, and not for convenience to the public."
"Nearly one-half of the passengers handled by the relator at the
Grand Central Terminal were of this class. Perhaps the same ratio
would exist upon the other railroads serving the city. We conclude
that the statute in question is valid as conferring a power on the
Commission to regulate rates for the public convenience and
welfare."
That decision was affirmed by the Court of Appeals of New York
on the opinion of the Appellate Division. 215 N.Y. 689.
The subject was elaborately considered by the Interstate
Commerce Commission in the Commutation Rate case, 21 I.C.C. 428, in
which the authority of the Commission to fix reasonable rates was
sustained. In the course of the opinion, Commissioner Harlan,
speaking for a unanimous Commission, said:
"Another case strongly relied upon by the defendants is
L.
S. & M. S. R. Co. v. Smith, 173 U. S.
699. It there appeared that the Legislature of the State
of Michigan had fixed the maximum passenger fare to be charged by
railroad companies for local journeys within the state. By a
subsequent enactment, it required the carriers to sell 1,000-mile
tickets for use within the lower peninsula at a price not exceeding
$20, and, in the Upper Peninsula, at a price not exceeding $25.
Various conditions affecting the
Page 245 U. S. 16
use of the tickets were also fixed by the act, and, among
others, that they should be valid for two years after the date of
purchase. It was held that, in the exercise of its general police
power, a state may fix maximum fares, but that it may not fix a
rate for 1,000-mile tickets that involves a discrimination in favor
of those who buy them. The statute was held to be invalid. The
case, however, involved mileage tickets which, we must repeat,
differ very essentially in character from commutation tickets."
"We have been referred to no other adjudication by the courts,
and are left to conclude that the precise point now before us has
not been passed upon by the courts."
"It will not be necessary to dwell here upon the importance of
the question not only to the particular suburban communities
involved on the record before us, but to many other such
communities throughout the country, the prosperity and growth of
which largely depend upon an efficient and reasonable commutation
service. Many such communities have not only been encouraged by the
carriers, but were in fact originally established largely on their
initiative. Suburban property has been bought, homes have been
established, business relations made, and the entire course of life
of many families adjusted to the conditions created by a
commutation service. This may not have been done on the theory that
the fares in effect at any particular time would always be
maintained as maximum fares, but countless homes have been
established in suburban communities in the belief that there would
be a reasonable continuity in the fares, and that the carriers, in
any event, would perform the service at all times for a reasonable
compensation."
"Nor need we stop to point out the distinction between
commutation tickets, on the one hand, and excursion and mileage
tickets, on the other. Compared with the normal one-way fare, all
such tickets may be said to be abnormal. But the resemblance stops
at that point. Although they
Page 245 U. S. 17
are mentioned together in § 22, the force and effect of that
provision must necessarily differ with the differing character of
the several kinds of tickets. It seems to be settled under that
section that a carrier may enter upon the policy and practice of
issuing mileage books and excursion tickets at less than its
regular normal fare for the one-way journey, and, having adopted
such a policy, may subsequently withdraw from it and refuse longer
to issue such tickets. That has been the view of this Commission,
and is the view generally entertained, although there may be
exceptional circumstances where a different conclusion would be
required. It by no means follows, however, that a carrier under §
22 may exercise the same scope and freedom of action with respect
to commutation tickets."
The reasoning of these decisions is sound, and involves no
violation of the federal Constitution. True it is that it may not
be possible to reconcile these views with all that is said in the
opinion delivered for the majority of the Court in the case of
Lake Shore & Michigan Southern Ry. Co. v. Smith,
supra. The views therein expressed which are inconsistent with
the right of the states to fix reasonable commutation fares when
the carrier has itself established fares for such service must be
regarded as overruled by the decision in this case.
We find no error in the decree of the Court of Appeals of
Maryland, and the same is
Affirmed.
THE CHIEF JUSTICE, MR. JUSTICE McKENNA, and MR. JUSTICE
McREYNOLDS dissent.
* Forty-Fourth Annual Report of the Railroad Commission for the
year 1912 (Massachusetts) pp. 67, 107, 113; Public Utilities
Reports, 1915B (Massachusetts) p. 362; Public Utilities Reports,
1915E (Rhode Island) p. 269; Public Service Commission Reports,
Second District of N.Y. (New York) Vol. III, pp. 212, 461;
idem, Vol. IV, p. 11; Public Utilities Reports, 1915B (New
Jersey) p. 161; Public Utilities Commission Reports, 1914
(Illinois) Vol. I, pp. 553, 590; Public Utilities Commission
Reports, 1913-1914 (Colorado) p. 131; Public Utilities Reports,
1915D (Idaho) p. 742; Opinions and Orders of the Railroad
Commission (California) Vol. I, pp. 451, 855;
idem, Vol.
II, p. 910;
idem, Vol. III pp. 5, 30, 32, 749, 800,807,
973;
idem, Vol. v. p. 555;
idem, Vol. VI, pp.
853, 1008;
idem, Vol. VII, pp. 179, 894; The Commutation
Rate case, 21 I.C.C. 428.