A common carrier cannot, under the Fourteenth Amendment, be
compelled by a state to continue operation of its railroad at a
loss. P. 251 U. S.
Where a railroad serving the public is owned and operated by a
lumber company in connection with its lumber business, it is the
business of the railroad, and not the entire business of the
company, which determines whether the railroad may be abandoned as
A mere suggestion in the opinion of a state court, unsupported
by evidence, cannot be taken as a finding of fact in determining
the scope and ground of its decision. Id.
Nor can a statement that the court has not jurisdiction to
consider relief claimed under the federal Constitution, because the
plaintiff has not complied with formalities under the state law, be
taken as placing the decision on a state ground when the court
actually passes upon and denies the merits of plaintiff's claim,
gives relief against plaintiff, and devotes its opinion almost
entirely to explaining and justifying such course. P. 251 U. S.
Forms imposed by local law cannot enable court and commissions
to do what the federal Constitution forbids. Id.
144 La. 1086 reversed.
The case is stated in the opinion.
Page 251 U. S. 397
MR. JUSTICE HOLMES delivered the opinion of the Court.
This is a suit by the Brooks-Scanlon Company, a Minnesota
corporation organized to manufacture and deal in lumber and to
carry on other incidental business, against the Railroad Commission
of Louisiana. It seeks to set aside an order (Number 2228) of the
Commission requiring the plaintiff, either directly or through
arrangements made with the Kentwood and Eastern Railway Company, to
operate its narrow gauge railroad between Kentwood and Hackley in
Louisiana upon schedules and days to be approved by the Commission.
The plaintiff alleges that the order cannot be complied with except
at a loss of more than $1,500 a month, and that to compel
compliance would deprive the plaintiff of its property without due
process of law, contrary to the Fourteenth Amendment of the
Constitution of the United States, with other objections not
necessary to be mentioned here. The defendant denies the
plaintiff's allegations, and, in reconvention, prays for an
injunction against the tearing up or abandoning of the road and for
a mandate upholding the order. In the court of first instance, a
preliminary injunction was issued in favor of the Commission, but
was dissolved upon bond. Subsequently a judgment was entered
denying a motion of the Commission to set aside the order
dissolving the injunction, and, after a trial on the merits,
judgment was entered for the plaintiff declaring the order void.
The defendant appealed from both judgments to the supreme court of
the state. That court reversed the decision below and reinstated
the injunction granted on the defendant's prayer.
Page 251 U. S. 398
It seems that the Banner Lumber Company, a Louisiana
corporation, formerly owned timber lands, sawmills, and this narrow
gauge railroad. The road was primarily a logging road, but it may
be assumed to have done business for third persons as a common
carrier. The Banner Lumber Company sold the whole property to the
Brooks-Scanlon Lumber Company on November 1, 1905, the stockholders
of which obtained a charter for the railroad as the Kentwood and
Eastern Railway Company on December 5 of the same year. In the
interim, it was managed by them with separate accounts. An oral
lease of the road was made to the new company, and soon afterwards
the Brooks-Scanlon Lumber Company transferred its property to the
Brooks-Scanlon Company, the plaintiff in error. On the first of
July, 1906, the Brooks-Scanlon Company made a written lease of the
road to the Railway Company and sold to it all the rolling stock
and personal property used in connection with the road. Thereafter
the road was run as before, doing a small business as a common
carrier but depending upon the carrying of logs and lumber to make
it a profitable, rather than a losing, concern. In course of time,
the timber of the Brooks-Scanlon Company was cut, and it terminated
the lease to the Railway Company, which discontinued business on
April 22, 1918, with the assent of the Railroad Commission, and
sold its rolling stock. At that time, the Commission being advised
that it had no power, did nothing more. But later, subsequent to a
decision by the supreme court in May, it issued notice to the
Brooks-Scanlon Company and the Railway to show cause why the road
should not be operated, gave a hearing, and issued the order
complained of here. The supreme court, after saying that the two
corporations were one under different names, stated that the only
question left for determination was whether the plaintiff could be
compelled by the Commission to operate
Page 251 U. S. 399
its railroad, and concluded that, although the railroad showed a
loss, the test of the plaintiff's rights was the net result of the
whole enterprise -- the entire business of the corporation -- and
on that ground made its decree.
We are of opinion that the test applied was wrong under the
decisions of this Court. A carrier cannot be compelled to carry on
even a branch of business at a loss, much less the whole business
of carriage. On this point, it is enough to refer to Northern
Pacific Ry. Co. v. North Dakota, 236 U.
, 236 U. S. 595
236 U. S.
-600, 236 U. S. 604
and Norfolk & Western Ry. Co. v. West Virginia,
236 U. S. 605
236 U. S. 609
236 U. S. 614
is true that, if a railroad continues to exercise the power
conferred upon it by a charter from a state, the state may require
it to fulfill an obligation imposed by the charter even though
fulfillment in that particular may cause a loss. Missouri
Pacific Ry. Co. v. Kansas, 216 U. S. 262
216 U. S.
-278. But that special rule is far from throwing any
doubt upon a general principle too well established to need further
argument here. The plaintiff may be making money from its sawmill
and lumber business, but it no more can be compelled to spend that
than it can be compelled to spend any other money to maintain a
railroad for the benefit of others who do not care to pay for it.
If the plaintiff be taken to have granted to the public an interest
in the use of the railroad, it may withdraw its grant by
discontinuing the use when that use can be kept up only at a loss.
Munn v. Illinois, 94 U. S. 113
94 U. S. 126
The principle is illustrated by the many cases in which the
constitutionality of a rate is shown to depend upon whether it
yields to the parties concerned a fair return.
While the decision below goes upon the ground that we have
stated, it is thrown in at the end as a makeweight that the order
of the Commission calls upon the plaintiff
"to submit a new schedule for transportation which may be
operated at much less expense to it than
Page 251 U. S. 400
the former schedule cost, and at a profit for plaintiff."
This is merely the language of hope. We cannot take it to be a
finding of fact, for we perceive nothing in the evidence that would
warrant such a finding. The assumption upon which the court made
its ruling was that the plaintiff's other business was successful
enough to stand a loss on the road.
Finally, a suggestion is made in argument that the decision
rested also upon another ground that cannot be reconsidered here.
At the end of the opinion, it is stated that the plaintiff has not
petitioned the Railroad Commission for leave to discontinue this
business, and that, until it has done so, the courts are without
jurisdiction of the matter. It is not impossible that this is an
oversight, since it seems unlikely that, after the Commission has
called the plaintiff before it on the question and against its
strenuous objection has required it to go on, such an empty form
can be required. But, in any case, it cannot be meant that the
previous discussion which occupies the whole body of the opinion is
superfluous and irrelevant to the result reached; nor can the words
be taken literally, since the court proceeded to take jurisdiction
and reinstated an injunction in favor of the defendant. Whatever
may be the forms required by the local law, it cannot give the
court or Commission power to do what the Constitution of the United
States forbids, which is what the order and injunction attempt.
Pennsylvania R. Co. v. Public Service Commission,
250 U. S. 566