Orders of a state commission fixing railroad rates under
legislative authority are state laws within the meaning of the
provision of the Judiciary Act of 1891, § 5, and Jud.Code, § 238,
allowing direct appeals from the district court to this Court in
cases in which a law of a state is claimed to contravene the
federal Constitution. P. 249 U. S.
When this Court, having jurisdiction on constitutional grounds,
under Jud.Code, § 238, reverses a final injunction decree of the
district court on direct appeal, with directions to dismiss the
bill without prejudice, and the district court, acting under a
reservation in its own decree, and within authority for further
proceedings allowed by the mandate, assesses and decrees the
damages caused by its injunctions, such supplementary decree is
part of the main cause, and appealable directly to this Court.
Upon reversal of final injunction decrees of the district court
with directions to dismiss the bills without prejudice, the
mandates allowed further proceedings in the causes in conformity
with the opinion and decree of this Court, according to right and
justice, etc. Held
that the district court was thus
empowered to determine and
Page 249 U. S. 135
decree damages arising under the injunction bonds prior to the
reversed decrees. St. Louis, Iron Mountain Southern, Ry. Co. v.
McKnight, 244 U. S. 368
explained. P. 249 U. S.
In awarding final injunctions restraining the enforcement of
railway rates as fixed by state authority, the district court
ordered that the preliminary injunction bonds be released and the
sureties thereon discharged from further liability. Held
that a failure to appeal from and assign error to this action
created no obstacle to the assessment of damages under the bonds,
after reversal of the final decrees by this Court, where the
mandate allowed further proceedings and the district court had
retained jurisdiction to make further orders if necessitated by
changed conditions. Id.
In suits by railroads to determine the adequacy of rates fixed
by a state commission, injunction orders restraining enforcement
were obtained on bonds conditioned for
refund to shippers if it should eventually be decided that the
orders should not have been made. Held:
(1) that the
conditions were broken by ultimate failure of plaintiffs to prove
the inadequacy of the rates and ultimate denial of relief on that
ground, although there was no specific adjudication that the
preliminary injunctions were improper; (2) that the period of the
obligation ended with final decrees of the district court awarding
permanent injunctions, and that the sureties were not liable for
claims arising thereafter and before reversal by this Court. Pp.
249 U. S.
A railroad company which, in virtue of an erroneous final decree
of injunction, collects charges in excess of rates lawfully fixed
by a state is equitably liable to make refunds to the shippers when
the decree is reversed on appeal. P. 249 U. S.
For the purpose of claiming such restitution in the injunction
suit, shippers not named as parties and represented theretofore
only by the state railroad commission, but who have been subjected
to the injunction as a class and obliged to pay the overcharges,
may intervene in a reference to a master, ordered by the district
court. P. 249 U. S.
And although such reference be ordered under a rule of court
relating only to damages recoverable on injunction bonds, it may
still furnish foundation for a decree against the railroad on the
theory of restitution also, if the merits are fully heard and the
facts undisputed. Id.
In its relation to the rights of shippers to recover
overcharges, whether under injunction bonds or on the theory of
restitution, a decree reversing the final injunctive decree of the
district court, with a direction to dismiss the bill, is
nonetheless conclusive because
Page 249 U. S. 136
made without prejudice to the right of the carrier to bring
future suit under changed conditions. P. 249 U. S.
Interest is recoverable upon such overcharges from the dates of
payment. P. 249 U. S.
that a carrier which has failed in a suit to
enjoin the enforcement of state rates as confiscatory is still free
to contest the validity of particular schedules as applied to
particular shippers in supplemental proceedings for restitution. P.
249 U. S.
The objection that a state rate discriminates between shipper,
in violation of the equal protection clause of the Fourteenth
Amendment, is not available to a carrier. P. 249 U. S. 149
Lake Shore & Michigan Southern Ry. Co. v. Smith,
173 U. S. 684
Cotting v. Kansas City Stock Yard Co., 183 U. S.
A movement of rough lumber from the woods to milling points in
the same state, where it remains for some months in the process of
manufacture before being sold and shipped as finished products to
purchasers and destinations previously unidentified, is not a
movement in interstate commerce, although the shipment of the rough
material is actuated by a belief, which is justified by experience
and market conditions, that 95% of the products will be marketed
and shipped outside of the state. P. 249 U. S.
Nos. 92, 93 reversed.
Nos. 94, 95 modified and affirmed.
The cases are stated in the opinion.
MR. JUSTICE PITNEY delivered the opinion of the Court.
These four cases were consolidated for the purposes of the
hearing in the district court, and have been treated as
consolidated for the purposes of the hearing on appeal. They are so
closely related that they may be dealt with in a single
Page 249 U. S. 137
On July 18, 1908, the two railway companies concerned -- the St.
Louis, Iron Mountain & Southern, which for brevity may be
called the Iron Mountain, and the St. Louis Southwestern, which may
be called the Southwestern -- brought separate suits in equity in
the Circuit Court (now the District Court) of the United States for
the Eastern District of Arkansas against the members of the State
Railroad Commission in their official capacity, and against two
citizens of that state named as frequent shippers of freight upon
the railroad lines, for injunctions to restrain the enforcement of
certain intrastate freight and passenger rates, setting up that the
commission was duly organized under an act of the legislature, and
was thereby authorized to fix rates to be charged by the railroads
in the State of Arkansas for the transportation of freight and
passengers in that state; that the commission had officially
adopted a tariff of freight rates applying to all classes and
commodities of freight on all railroads operated in the state, and
had ordered it to take effect on June 15, 1908; that the rates were
unreasonable, unjust, discriminatory, confiscatory, and void; that
they did not yield an adequate return for the services rendered,
and that the operation of said tariff would deprive complainants of
their property without due process of law and deny to them the
equal protection of the laws, in violation of § 1 of the Fourteenth
Amendment to the Constitution of the United States. It was further
alleged that the rates for the transportation of passengers in the
state fixed by an act of the legislature passed February 9, 1907,
and promulgated by order of the railroad commissioners, were
confiscatory and void in their effect upon the complainant
railways, and therefore violative of the Fourteenth Amendment; but
the passenger rates are not involved in the present appeals, and
need not be further mentioned.
The jurisdiction of the federal court depended solely
Page 249 U. S. 138
upon the ground that the cases arose under the Constitution of
the United States, and that the matter in controversy in each case
exceeded the jurisdictional amount.
Temporary injunctions were issued in September, 1908, and
continued in force during the pendency of the suits. The circuit
court, upon granting them, ordered in each case that the
complainant should execute a bond in the penal sum of $200,000
conditioned that complainant should keep a correct account
respecting its carriage of passengers and freight, showing the
difference between the tariff actually charged and that which would
have been charged had the rate inhibited been applied, also showing
the particulars of the carriage, and the names of the persons
affected as far as practicable, the record to be kept subject to
the further order of the court, and further conditioned that if it
should eventually be decided that so much of the order as inhibited
the enforcement of the rates ought not to have been made, the
complainant should within a reasonable time to be fixed by the
court refund in every instance to the party entitled the excess in
charge over what would have been charged had the inhibited rates
been applied, together with lawful interest and damages.
Complainants entered into such bonds with sureties. Later, an
additional injunction bond was required to be and was furnished by
each complainant, but without sureties, conditioned substantially
Full answers having been filed by the railroad commission, and
testimony having been taken, the cases were brought on to final
hearing, and on May 11, 1911, final decrees were made, the same in
both cases. They enjoined the commissioners and their successors,
the individual shippers named as defendants, and all other patrons
of the road in the shipment of freight between stations in the
State of Arkansas, from enforcing or attempting to enforce any of
the provisions of the freight tariff in question. In addition to
this, and after disposing
Page 249 U. S. 139
of the question of costs, each decree ordered that the bond for
injunction be released and the sureties thereon discharged from
liability, and concluded as follows:
"And the court reserves and retains unto itself jurisdiction of
the subject matter of this suit and of all parties hereto, to the
end that such other and further orders and decrees may be made
herein as may become necessary by reason of any changed conditions
as to the facts, equities or rights that may hereafter take place
The railroad commissioners appealed to this Court (the defendant
shippers having been severed), the cases were heard together, and
the decrees of the circuit court were reversed June 16, 1913, with
directions to dismiss the bills without prejudice. Allen v. St.
Louis, Iron Mountain & Southern Ry., 230 U.
. The causes were remanded to the district court,
the mandate in each case reciting the reversal and the order
remanding the cause with directions to dismiss the bill without
prejudice, and concluding as follows:
"You therefore are hereby commanded that such execution and
further proceedings be had in said cause, in conformity with the
opinion and decree of this Court, as according to right and
justice, and the laws of the United States ought to be had, the
said appeal notwithstanding."
Upon the going down of the mandates, the district court on July
18, 1913, entered decrees in obedience thereto dismissing the bills
without prejudice and dissolving the injunctions, and at the same
time and as a part of the same decrees made a reference under a
rule of the court to a special master for the purpose of
determining the damages alleged to have been sustained by the
railroad commissioners by reason of the granting of the temporary
and permanent injunctions, declaring:
"That in determining these damages, for the recovery of which
the said commissioners are not acting for themselves, but for the
benefit of all persons, shippers, consignees and passengers,
Page 249 U. S. 140
have sustained any damages by reason of the granting of said
the master was authorized to examine witnesses and to give
notice by publication that all persons having claims against the
complainants by reason of the granting of the injunctions should
present them within a time specified for the purpose.
Under this reference, the appellants in cases Nos. 92 and 93 and
the appellees in Nos. 94 and 95 intervened and presented claims for
a refund of the difference paid by them in freight rates between
the rates prescribed by the commission and those put in force by
the railway companies. The master reported favorably upon these
claims, dividing the amounts allowed into three periods, the first
and second of which included the time elapsed between September 3,
1908, when the interlocutory injunctions were issued, and May 11,
1911, the date of the final decrees, and the third period included
the time elapsed between the latter date and July 18, 1913, the
date of the decrees entered upon the mandates. The railway
companies filed exceptions to the master's report, which were
sustained by the district court as to the claims involved in cases
Nos. 92 and 93 and overruled as to those involved in Nos. 94 and
95, and a combined decree was made accordingly.
The parties aggrieved, desiring to appeal and being in doubt
whether the appeal lay to this Court or to the circuit court of
appeals, prayed for and were allowed appeals to both courts. Hence,
the first question that confronts us is whether the decree is the
subject of a direct appeal to this Court.
We are clear this question must be answered in the affirmative.
The appeals from the final decrees in the main causes were brought
direct to this Court, because of the constitutional question, under
§ 5 of the Circuit Court of Appeals Act of March 3, 1891, c. 517,
26 Stat. 827, which provided for such an appeal in the
Page 249 U. S. 141
cases, among others:
"In any case that involves the construction or application of
the Constitution of the United States. . . . In any case in which
the Constitution or law of a state is claimed to be in
contravention of the Constitution of the United States."
This section, of course, was the predecessor of § 238, Judicial
Code, under which the present appeals were taken. And it is plain
that the orders of the Railroad Commission were state laws within
the meaning of this provision. Williams v. Bruffy,
96 U. S. 176
96 U. S. 183
Atlantic Coast Line v. Goldsboro, 232 U.
, 232 U. S.
The provisions of the Judicial Code which regulate the
jurisdiction of the circuit court of appeals originated in § 6 of
the Act of 1891. They must be construed together with those
provisions of law that confer upon the district court (§ 24,
Judicial Code), and formerly conferred upon the Circuit Court,
original jurisdiction in suits of a civil nature arising under the
Constitution or laws of the United States, and in suits between
citizens of different states. By § 128 of the Code, the circuit
courts of appeals are to exercise appellate jurisdiction over the
final decisions of the district courts
"in all cases other than those in which appeals and writs of
error may be taken direct to the Supreme Court, as provided in §
238, unless otherwise provided by law; and, except as provided in
§§ 239 and 240, the judgments and decrees of the circuit courts of
appeals shall be final in all cases in which the jurisdiction is
upon diversity of citizenship. Section 239 provides for the
certification of questions by the circuit court of appeals to this
Court; § 240 permits this Court to review by certiorari any case in
which the judgment or decree of the circuit court of appeals is
made final; and, by § 241, in any case in which the judgment or
decree of that court is not made final, there may be an appeal or
writ of error
Page 249 U. S. 142
to this Court where the matter in controversy exceeds $1,000
The present appeals relate to a decree made in a subordinate
action ancillary to the main causes, in which, as has been stated,
the federal jurisdiction was invoked solely upon the ground that
the cases arose under the Constitution of the United States. It has
been held repeatedly that jurisdiction of subordinate actions is to
be attributed to the jurisdiction upon which the main suit rested,
and hence that, where jurisdiction of the main cause is predicated
solely on diversity of citizenship and the decree therein is for
this reason made final in the circuit court of appeals, the
judgments and decrees in the ancillary litigation also are final.
Rouse v. Letcher, 156 U. S. 47
Gregory v. Van Ee, 160 U. S. 643
Rouse v. Hornsby, 161 U. S. 588
Pope v. Louisville, etc., Ry. Co., 173 U.
, 173 U. S.
The proceeding out of which the decree now in question arose was
not merely ancillary, but was in effect a part of the main causes,
taken for the purpose of carrying into effect the decrees of this
Court, reversing the final decrees in the main causes, and at the
same time for the purpose of giving effect to a reservation of
jurisdiction by the court below as contained in those final
decrees. The supplementary decree that is now before us, since it
simply brings to a conclusion those former suits pursuant to our
decrees therein, must be treated as involving the construction and
application of the Constitution of the United States and as being
made in a case in which a state law was claimed to be in
contravention of the federal Constitution within the meaning of §
238 Judicial Code.
Therefore the motions to dismiss must be denied.
Upon the merits, it will be convenient to take up first the case
of the Southern Cotton Oil Company, appellee in Nos. 94 and 95, in
whose favor claims were allowed by
Page 249 U. S. 143
the master as against each of the two railways and for each of
the periods referred to. The railways excepted upon two grounds:
(1) because the final decrees of May 11, 1911, discharging the
injunction bonds and releasing the makers thereof from liability
had the effect to relieve the railways and their sureties from all
liability by reason of the granting of the injunctions, and (2) as
to such claims for overcharges as accrued subsequent to the date of
the final decrees, on the ground that, upon the rendition of those
decrees, the injunction bonds ceased to be operative and created no
further liability, and that the railways incurred no liability to
the claimants under the final decrees. The district court overruled
the exceptions and sustained the claims of the Oil Company as
against the railway companies and the sureties with interest at 6
percent per annum from the respective dates that the overcharges
We deal first with so much of the overcharges as accrued prior
to the final decrees. In St. Louis, Iron Mountain &
Southern Ry. Co. v. McKnight, 244 U.
, 244 U. S. 373
doubt was expressed whether, in view of the form of the mandate,
there was any power in the district court to determine the
liability of the railway companies upon the bonds. But at that
time, our attention was not called to the fact that the mandates
contained a provision authorizing further proceedings -- a
provision that removes all question of the power of the district
court. In re Louisville, 231 U. S. 639
231 U. S. 645
Louisville v. Cumberland Tel. Co., 231 U.
In support of the contention that the final decrees had the
effect of discharging the complainants and their sureties from
liability upon the bonds by reason of previous overcharges, it is
pointed out that this part of the decrees was not appealed from,
nor was error assigned to the court's action in vacating the bonds
and releasing the sureties. Whether, under the circumstances,
Page 249 U. S. 144
action of this Court in reversing the decrees in respect of
their main provisions granting permanent injunctions had the effect
of reversing also that portion which discharged the liability upon
the injunction bonds is a question upon which we need not pass.
For, irrespective of this, those clauses of the final decrees by
which the district court retained jurisdiction for the purpose of
making such further orders and decrees as might become necessary,
coupled with the subsequent mandates of this Court permitting
further proceedings to be taken in conformity with our opinion and
decrees and according to right and justice, empowered the district
court to set aside so much of its final decrees as released the
railways and their sureties from liabilities theretofore incurred
under the injunction bonds. This is what the district court in
effect did when it ordered the reference and sustained the claims
of the Oil Company so far as they accrued prior to the final
It is argued that the condition of the bonds -- that, if it
should eventually be decided that the order inhibiting the
enforcement of the commission rates should not have been made, the
complainant should refund, etc. -- never was broken, because it was
not at any time adjudged that the allowance of the temporary
injunctions was improper. But this is to construe the bonds
according to the letter, and not according to the substance. The
state statute and the orders of the Railroad Commission entitled
shippers to the benefit of the rates thereby established, and they
were thus entitled at all times, except as it became necessary to
stay the operation of the rates by equitable process in order to
permit of a judicial investigation into the question of their
adequacy. The burden of proof to show them inadequate was upon the
railway companies, and, when they failed to sustain this burden,
they at the same time showed that the injunctions ought not to have
Page 249 U. S. 145
As to that portion of the claims which accrued after the final
decrees, this, as we already have held in the McKnight
case, 244 U. S. 244
368, 244 U. S. 374
was not recoverable upon the injunction bonds, nor against the
sureties therein. On a fair construction of the conditions of those
instruments, their obligation expired by limitation when the suits
were brought to a final conclusion. Hence, to the extent that the
supplemental decree now under review awards a recovery against the
sureties for claims accruing after the final decrees, it must be
But, in our opinion, this portion of the claims is allowable
against the railway companies themselves upon the principle, long
established and of general application, that a party against whom
an erroneous judgment or decree has been carried into effect is
entitled, in the event of a reversal, to be restored by his
adversary to that which he has lost thereby. This right, so well
founded in equity, has been recognized in the practice of the
courts of common law from an early period. Where plaintiff had
judgment and execution, and defendant afterwards sued out a writ of
error, it was regularly a part of a judgment of reversal that the
plaintiff in error "be restored to all things which he hath lost by
occasion of the said judgment;" and thereupon, in a plain case, a
writ of restitution issued at once, but if a question of fact was
in doubt, a writ of scire facias
was first issued.
Salk. 588, citing Goodyere v. Ince,
Cro.Jac. 246; Sympson v. Juxon,
Cro.Jac. 699; Vesey v.
Cro.Car. 328. See also
Lil.Ent. 641, 650;
Arch.Append. 195, 200. The doctrine has been mostly fully
recognized in the decisions of this Court. Bank of the
United States v. Bank of Washington,
6 Pet. 8,
31 U. S. 17
7 How. 172, 48 U. S. 184
Northwestern Fuel Co. v. Brock, 139 U.
That a course of action so clearly consistent with the
principles of equity is one proper to be adopted in an equitable
proceeding goes without saying. It is one of the
Page 249 U. S. 146
equitable powers, inherent in every court of justice so long as
it retains control of the subject matter and of the parties, to
correct that which has been wrongfully done by virtue of its
process. Northwestern Fuel Co. v. Brock, 139 U.
, 139 U. S. 219
Johnston v. Bowers,
69 N.J.L. 544, 547.
It is argued that the claimant is not in a position to invoke
the principle of restitution in this proceeding, because it was not
a party to the original proceedings, but came in by intervening
before the master. This point is unsubstantial. The Railroad
Commission, in defending the rate schedules against the attack of
the railway companies, represented all shippers; the permanent
injunctions that were awarded by the final decrees restrained all
shippers from taking advantage of the commission rates, and, during
the time that those decrees remained unreversed, the railway
companies obtained the benefit of the injunction by exacting from
this claimant, among others, in addition to the commission rates,
those excess charges that form the basis of the present claims. It
is a typical case for the application of the principle of
restitution, and the district court properly held the commission to
be the representative of the shippers for this purpose.
The suggestion that the order of reference was made under a rule
of court that related only to damages recoverable on injunction
bonds, and furnished no foundation for a decree against the
railways on the theory of restitution, is without weight. The
companies were fully heard upon the merits, and there is no
question about the facts.
In behalf of the railways, it is argued that the reversal of the
decrees of May 11, 1911, "without prejudice," left the rights of
the parties still in doubt, and thus rendered it improper for the
district court to award damages against the railways either on the
basis of a breach of the injunction bonds or on the basis of
Page 249 U. S. 147
But it seems to us that the rights of the present shippers were
so clear as to make an allowance of damages upon the injunction
bonds and restitution upon the reversal of the decrees manifestly
their due. That the reversal was "without prejudice" did not
deprive the decrees of conclusiveness as to past transactions, but
only prevented them from being a bar to future suits for injunction
upon a showing of changed conditions. Missouri v. C., B. &
Q. R. Co., 241 U. S. 533
241 U. S.
The contention that there was error in allowing interest upon
the amount of the overcharges is unsubstantial. The damage was
complete when the overcharges were made, and as they were
wrongfully made and without consent of the shippers, interest ran
from that date on general principles.
For these reasons, the decree in favor of the Southern Cotton
Oil Company, modified so as to relieve the sureties from that part
of the claims which accrued after the final decrees of May 11,
1911, will be affirmed.
The claims of both the Arkadelphia Milling Company (No. 92) and
Hasty & Sons (No. 93) were based upon the difference between
rates charged on rough lumber from the forest to milling points and
the rates provided in the commission tariff on such movements. The
tariff contained certain maximum rates on lumber of this character
applicable generally, and in addition certain "rough material
rates" much lower than the others, conditioned upon a certain
percentage of the manufactured product being shipped over the same
line that brought in the rough material. The railway companies
excepted to the allowance in favor of each of these appellants upon
the ground that the "rough material rates" were discriminatory
against shippers who did not reship the specified percentages of
the finished product. As to the Hasty claim, there was an
additional exception based upon the
Page 249 U. S. 148
ground that the movement of rough material to milling points in
the state and the subsequent forwarding of the finished product to
market points outside of the state constituted interstate commerce,
so that the rough material rates prescribed by the state commission
were not applicable. The court sustained the exceptions on both
To take up first the question of discrimination: the tariff gave
the benefit of the rough material rates only where the shipper
transported over the line of the carrier a certain percentage of
the product manufactured from the rough material. The master found
that the condition was complied with by these shippers, and
sustained the allowances accordingly.
The district court sustained the defense of discrimination upon
the authority of Lake Shore & Michigan Southern Ry. Co. v.
Smith, 173 U. S. 684
Cotting v. Kansas City Stockyards Co., 183 U. S.
We assume without deciding that, notwithstanding the general
result adverse to the railway companies in the main suits, they
were still at liberty to dispute the validity of the rate schedule
as it related to particular shippers. See Chicago, Milwaukee
& St. Paul Ry. Co. v. Minnesota, 134 U.
, 134 U. S. 460
concurring opinion of Mr. Justice Miller; St. Louis & San
Francisco Ry. v. Gill, 156 U. S. 649
156 U. S. 659
156 U. S. 666
Ex parte Young, 209 U. S. 123
Missouri v. Chicago, Burlington & Quincy R. Co.,
241 U. S. 533
241 U. S.
In our opinion, however, the district court erred in its ruling.
The rough material rates were but parts of a general schedule that
covered a wide field. This schedule was established in the exercise
of the legislative authority of the state, and could not be set
aside by the court on the ground of discrimination unless it
amounted to a denial of the equal protection of the laws guaranteed
by the Fourteenth Amendment.
Page 249 U. S. 149
But there is nothing to show that the rough material rates
wrought any discrimination against the railway companies. They were
applicable upon all railways alike. If there was-, not in the least
intimating that there was, undue discrimination as against small
shippers or those who had no occasion to obtain transportation for
the manufactured product over the line of the same carrier, this
was not a matter of which the railways could complain. It is most
thoroughly established that before one may be heard to strike down
state legislation upon the ground of its repugnancy to the federal
Constitution, he must bring himself within the class affected by
the unconstitutional feature. Plymouth Coal Co. v.
Pennsylvania, 232 U. S. 531
232 U. S. 544
Jeffrey Mfg. Co. v. Blagg, 235 U.
, 235 U. S. 576
Mallinckrodt Works v. Missouri ex rel. Jones, 238 U. S.
, 238 U. S. 54
Cusack Co. v. Chicago, 242 U. S. 526
242 U. S.
Lake Shore & Michigan Southern Ry. Co. v. Smith,
173 U. S. 684
not set aside this established principle. The discrimination in
favor of certain patrons there referred to was laid hold of,
rather, as showing the unreasonable character of the regulation.
The authority of that case is not to be extended. Louisville
& Nashville R. Co. v. Kentucky, 183 U.
, 183 U. S. 511
Pennsylvania R. Co. v. Towers, 245 U. S.
Cotting v. Kansas City Stockyards Co., 183 U. S.
, is not at all in point. While the opinion of Mr.
Justice Brewer covers a wide range of discussion, a majority of the
Court (p. 183 U. S. 114
placed the decision upon the ground that the statute of Kansas
applied only to a single company, and not to others engaged in like
business in the state, and thereby denied to that company the equal
protection of the laws.
There remains the question whether the shipments by J. F. Hasty
& Sons of rough material from the forest to the milling point,
followed by the forwarding of the finished product to points
outside of the state, constituted interstate
Page 249 U. S. 150
commerce. If they did, it is obvious that the state tariff was
not applicable to them.
The following statement, taken from the record, shows the
admitted facts as to the course of business:
"When the rough material reached the mills, it was manufactured
into finished staves, headings, and hoops, and in this condition
shipped to whoever purchased them. The purchaser uses them in
making barrels, casks, etc. The wastings in the finishing of said
articles from the rough material were either disposed of for
firewood or destroyed. When the rough material left the woods, a
bill of lading was issued from the woods to the mill. When the
rough material reached the mill, it was finished into some or all
of the articles described, when it was stacked in the yards or
placed in kilns to dry. The process of manufacturing and drying
occupied several months, or, on an average, this process would be
gone through with, the finished products sold and shipped to the
purchaser, in about five months from the date the rough material
was received at the mill. The claimants classified the different
parts after they came from the mill completely finished, and made
sales from such stock. The markets for the manufactured articles
were almost altogether in other states than Arkansas, or in foreign
countries, and about ninety-five percent of the sale of finished
articles -- that is, of the total outbound shipments -- were made
for delivery at points outside the State of Arkansas, the remaining
five percent being sold and delivered, or shipped to points within
the State of Arkansas. At the time the rough material was shipped
to the mills, the mills did not know to whom they would sell the
finished product, or to what points it would be shipped, but did
know that there was little market for the finished articles in the
State of Arkansas, and expected that they would sell ninety-five
percent of said finished articles and ship them to points outside
the State of Arkansas. "
Page 249 U. S. 151
"It was the intention of all the claimants herein, at the time
they shipped the rough material into the milling points, to mill
said rough material with the object of selling the said finished
product and shipping it out as soon as practicable, and all of them
knew and intended at the time they brought the rough material into
the mill, on account of previous course of dealings in the
business, that ninety-five percent of the finished product would be
by them shipped to points outside the State of Arkansas."
"The claimants paid the usual property tax to the State of
Arkansas on their stock of materials on hand at the milling point,
whether said stock was in the rough or finished, the amount of the
tax being arrived at according to the methods in use in the State
of Arkansas by the use of an average basis."
Upon the facts as stated, it is our opinion that the district
court erred in treating the movement of the rough lumber from the
woods to the milling point as interstate commerce. It is not merely
that there was no continuous movement from the forest to the points
without the state, but that, when the rough material left the
woods, it was not intended that it should be transported out of the
state, or elsewhere beyond the mill, until it had been subjected to
a manufacturing process that materially changed its character,
utility, and value. The raw material came to rest at the mill, and
after the product was manufactured, it remained stored there for an
indefinite period, manufacture and storage occupying five months on
the average, for the purpose of finding a market. Where it would
eventually be sold no one knew. And the fact that previous
experience indicated that 95 percent of it must be marketed outside
of the state so that this entered into the purpose of the parties
when shipping the rough material to the mill did not alter the
character of the latter movement. The question is too well settled
Page 249 U. S. 152
previous decisions to require discussion. Coe v. Errol,
116 U. S. 517
116 U. S. 525
Bacon v. Illinois, 227 U. S. 504
227 U. S.
-516; McCluskey v. Marysville & Northern Ry.
Co., 243 U. S. 36
The distinction between these cases and those cited to sustain
the decision of the district court (Swift & Co. v. United
States, 196 U. S. 375
196 U. S. 398
Ohio R. Co. Commission v. Worthington, 225 U.
; Texas & New Orleans R. Co. v. Sabine
Tram Co., 227 U. S. 111
Louisiana R. Co. Commission v. Texas & Pacific Ry.
Co., 229 U. S. 336
so evident that particular analysis may be dispensed with.
The exceptions sustained by the district court to the claims of
the Arkadelphia Milling Co. and Hasty & Sons having been found
to be untenable, it results that these claims should be allowed as
against the railway companies and their sureties, so far as they
arose before the final decrees, and as against the railway
companies only, so far as they arose after the final decrees.
Nos. 92 and 93, decree reversed; Nos. 94 and 95, decree
modified and affirmed, and the cause remanded for further
proceedings in conformity with this opinion.