1. The usual permissive charter of a railroad company does not
oblige the company to operate its railroad at a loss, nor is such
obligation to be implied from acceptance of the charter and
operation under it. P. 264 U. S.
2. In the presence of a reasonable certainty that future
operation will be at a loss, a railroad company, in the absence of
a contract, may cease operation, dismantle its road, and realize
its salvage value. Id.
3. Were the railroad to be compelled by the state in such
circumstances to continue operation at a loss, it would be deprived
of its property without due process of law. Id.
Page 264 U. S. 80
4. The principle allowing a railroad company to withdraw its
property from public use that can be kept up only at a loss is
consistent with the state's power to regulate while the company
continues to exercise the privileges of its charter. P.
264 U. S.
5. The mere presence of a particular provision in the statutes
of a state relating to railroads, or even in a special act
incorporating a railroad company, does not suffice to show that the
provision is a part of the charter contract. P. 264 U.S. 86
6. When it becomes necessary to consider whether a state is
attempting to deprive a litigant of property without due process,
and the question turns on the existence and terms of an asserted
contract, this Court determines for itself whether there is a
contract and what are its terms. Id.
7. Article 6676, Rev.Civ.Stats. 1911, of Texas, requiring all
railroads "carrying passengers for hire" to run certain passenger
trains and make certain stops, etc., is a mere regulation of
passenger service on roads in operation, and does not subject a
railroad company, through charter contract or otherwise, to an
absolute duty to operate for its full charter period in face of a
reasonable certainty of pronounced loss. P. 264 U.S. 87
8. Article 6625, Rev.Civ.Stats. 1911, of Texas (Act of March 29,
1889, c. 24) relates to the organization, rights, and duties of
corporations formed to take over, maintain, and operate railroads
sold under judicial decree, etc., and the clause, in its proviso
"nor shall the main track of any railroad once constructed and
operated be abandoned or removed" applies only to railroads so
sold. P. 264 U. S.
283 F. 584 affirmed.
Appeals from two decrees of the district court, the first
awarding a permanent injunction in the Railroad Company's suit,
brought in that court, to restrain the Railroad Commission of Texas
and others from interfering with its right to abandon operation and
dismantle and salvage its property; the second, dismissing a bill
to restrain such abandonment, etc., brought by the state in a court
of the state and removed to the district court. See also
258 U. S. 258
204, where the same cases were passed upon by this Court in another
Page 264 U. S. 82
MR. JUSTICE VAN DEVANTER delivered the opinion of the Court.
These two suits involve the right of the Eastern Texas Railroad
Company, a Texas corporation having a railroad in that state, to
dismantle and abandon its road. One was brought by the company to
prevent threatened interference by the state's officers, the other
by the state to prevent intended dismantling and abandonment by the
company. The former was begun in the district court; the latter was
removed into that court from a state court. The company prevailed,
283 F. 584, and the state and its officers prosecute these direct
Page 264 U. S. 83
The road is 30.3 miles long, and all in Texas. The company
constructed it in 1902, operated it continuously until April 30,
1921, and then discontinued its operation because it had proved a
losing venture. The traffic over it during the period of operation
was in greater part interstate and foreign commerce and in lesser
part intrastate commerce. The withdrawal from interstate and
foreign commerce had the sanction of the Interstate Commerce
Commission, given under a law of Congress, and was sustained by
this Court in Texas v. Eastern Texas R. Co., 258 U.
. The present controversy relates to the
withdrawal from intrastate commence and the intended dismantling
and abandonment of the road.
The road was constructed primarily to carry traffic to and from
large lumbering industries in that territory, but, in the course of
time, those industries exhausted the adjacent supply of timber, and
in 1917 they were permanently closed and the people who had been
employed in them moved away. The traffic over the road then fell
off so much that the revenue became pronouncedly less than the cost
of operation. But the operation was continued until the company had
exhausted its surplus accumulated in prior years, had come to be
without cash or credit, and was unable to go on. Its only remaining
property consisted of the road and some meager equipment, and these
had shrunken in value from $450,000 to $50,000 -- the latter being
the estimated salvage value less the cost of dismantling. The
property was offered for sale at $50,000 to anyone who would
operate the road, and the offer was widely advertised, but without
eliciting any acceptance or bid. Essential repairs would cost
$185,000. The operating cost would be as much as $84,000 per year;
the possible revenue from all traffic would not exceed $50,000, and
that from intrastate traffic would not be more than $20,000. The
adjacent country was sparsely populated; the soil had proved to be
usually unproductive; there were
Page 264 U. S. 84
no local industries, and the general situation precluded any
reasonable expectation that the road would become self-sustaining
in the future. In these circumstances, the company concluded to
cease all operation and to dismantle and abandon the road.
The company was incorporated under a general law of the state in
1900 for a term of 25 years, and when it ceased operating the road,
4 1/2 years of that term remained. It had not received any state
land grant or other public aid, nor had it acquired any property
through an exercise of the power of eminent domain, although that
power was available under the law of the state.
In the district court, the state and its officers took the
position that, under the state statutes, the company was prohibited
from dismantling or abandoning its road, and was in duty bound, and
could be compelled, to operate the same in intrastate commerce for
the remainder of the 25-year term. In this Court, they have adhered
to that position, with the qualification that, in the circumstances
shown, the company may not be compelled to operate the road, but
may be made to respond in damages to the state for a failure to
operate it. The company, on the other hand, has contended
throughout that the state statutes neither prohibit the dismantling
and abandonment of the road nor lay on the company a duty to
operate it when that can be done only at a loss, and that, if the
statutes be as insisted on the other side, they deprive the company
of property without due process of law, and in that respect are in
conflict with the Fourteenth Amendment to the Constitution of the
The appellants rely on two statutory provisions, which they
insist were in force when the company was incorporated and became a
part of the charter contract. Before examining these provisions, it
is well to advert to principles which would govern in their
absence, and also to considerations bearing on their office and
Page 264 U. S. 85
The usual permissive charter of a railroad company does not give
rise to any obligation on the part of the company to operate its
road at a loss. No contract that it will do so can be elicited from
the acceptance of the charter or from putting the road in
operation. The company, although devoting its property to the use
of the public, does not do so irrevocably or absolutely, but on
condition that the public shall supply sufficient traffic on a
reasonable rate basis to yield a fair return. And if at any time it
develops with reasonable certainty that future operation must be at
a loss, the company may discontinue operation and get what it can
out of the property by dismantling the road. To compel it to go on
at a loss or to give up the salvage value would be to take its
property without the just compensation which is a part of due
process of law. The controlling principle is the same that is
applied in the many cases in which the constitutionality of a rate
is held to depend upon whether it yields a fair return.
Brooks-Scanlon Co. v. Railroad Commission of Louisiana,
251 U. S. 396
251 U. S. 399
Bullock v. Railroad Commission of Florida, 254 U.
, 254 U. S. 520
State ex rel. v. Jack,
113 F. 823; 145 F. 281; State
v. Old Colony Trust Co.,
215 F. 307, 312; Northern Pacific
R. Co. v. Dustin, 142 U. S. 492
142 U. S. 499
Commonwealth v. Fitchburg R. Co.,
12 Gray 180, 190;
State v. Dodge City, etc., Ry. Co.,
53 Kan. 329, 336.
So long as the railroad company "continues to exercise" the
privileges conferred by its charter, the state has power to
regulate its operations in the interest of the public, and to that
end may require it to provide reasonably safe and adequate
facilities for serving the public, even though compliance be
attended by some pecuniary disadvantage. Atlantic Coast Line R.
Co. v. North Carolina Railroad Commission, 206 U. S.
, 206 U. S. 26
Missouri Pacific Ry. Co. v. Kansas, 216 U.
, 216 U. S. 279
Chesapeake & Ohio Ry. Co.
v. Public Service Commission,
Page 264 U. S. 86
U.S. 603, 242 U. S. 607
But this rule in no wise militates against the principle that the
company may withdraw its property from use by the public "when that
use can be kept up only at a loss." Brooks-Scanlon Co. v.
Railroad Commission of Louisiana, supra.
A state often has many laws relating to railroads on its statute
books which do not become a part of the charter contract -- which
are of such a nature that it is apparent the state could not have
intended to make or exact a continuing and binding stipulation
embodying their terms. Among such laws are those containing
specific regulations respecting the safety of employees and
travelers, liability for injuries, facilities for handling and
moving traffic and redress for failure to provide the facilities
prescribed. The occasion for keeping such matters where the
legislature may deal with them as changing conditions may require
forbids that they be regarded as part of the charter contract
unless a purpose to make them such be plainly disclosed. In short,
the fact that a particular provision is found in the statutes of
the state relating to railroads, or even in a special act
incorporating a railroad company, does not, in itself, suffice to
show that the provision is a part of the charter contract.
Texas & New Orleans R. Co. v. Miller, 221 U.
, 221 U. S. 415
Chicago, Burlington & Quincy Ry. Co. v. Railroad Commission
of Wisconsin, 237 U. S. 220
237 U. S. 234
And see Wisconsin & Michigan R. Co. v. Powers,
191 U. S. 379
191 U. S.
Where it becomes necessary to consider whether a state is
depriving, or attempting to deprive, a litigant of property without
due process of law in violation of the Fourteenth Amendment, and
the question turns on the existence and terms of an asserted
contract, this Court determines for itself whether there is a
contract and what are its terms. Louisville & Nashville R.
Co. v. Palmes, 109 U. S. 244
109 U. S. 255
Stearns v. Minnesota, 179 U. S. 223
179 U. S.
"The principle is general and necessary. Ward
Page 264 U. S. 87
Love County, 253 U. S. 17
, 253 U. S.
. If the Constitution and laws of the United States
are to be enforced, this Court cannot accept as final the decision
of the state tribunal as to what are the facts alleged to give . .
. the right or to bar the assertion of it even upon local
Davis, Director General of Railroads v. Wechsler,
263 U. S. 22
263 U. S.
By way of distinguishing the cases in hand from some which are
cited by the appellants, it is enough to observe that here, the
company has ceased to exercise the privilege, conferred by its
charter, of maintaining and operating the road as a common carrier,
and this because the available traffic has diminished to a point
where further operation is economically impossible.
One of the statutory provisions relied on is found in Article
6676 of the Revised Civil Statutes of 1911, and requires that, on
all railroads "carrying passengers for hire," there shall be at
least one passenger train a day, Sundays excepted; that these
trains shall stop at stations a sufficient time to discharge and
receive passengers, and that, "if so many are run," four of these
trains going each way shall stop daily, Sundays excepted, at county
seats. This is nothing more than a regulation of passenger service
on roads which are in operation and engaged in that service. It
does not purport to impose an unconditional duty to operate, or to
carry passengers, but requires that, where and while a passenger
service is maintained, it shall conform to the standards stated.
Such a provision falls far short of subjecting a railroad company,
through charter contract or otherwise, to an absolute duty to
operate its road for the full charter period, even after it becomes
reasonably that the operation will be at a pronounced loss.
The other provision on which the appellants rely was enacted as
part of an Act of March 29, 1889, c. 24, and was reenacted as
Article 4550 of the Revised Civil
Page 264 U. S. 88
Statutes of 1895 and as Article 6625 of the like Statutes of
1911. The original enactment is described in its caption as
relating "to rights of purchasers of roadbeds, etc., sold for
debt," and in the captions of both reenactments as relating to "new
corporations in case of sale." It provides that the purchasers of
any railroad sold under judicial decree, etc., and their associates
shall be entitled to form a corporation to take over, maintain, and
operate the road with power to "construct and extend." This is
followed by provisos of a restrictive nature, the last of which
"Provided, that, by such purchase and organization, no rights
shall be acquired under any former charter or law in conflict with
the provisions of the present constitution in any respect, nor
shall the main track of any railroad once constructed and operated
be abandoned or removed."
A second section provides that any corporation so formed which
shall "claim to be under the jurisdiction of the federal courts"
shall thereby forfeit its organization, etc., and a third section
declares the existence of an emergency requiring that the act take
effect immediately on its passage, because of the absence of any
sufficient law providing for the formation of a corporation "for
the purpose of acquiring, owning, and extending such sold out
property." A reading of the enactment, including its caption and
emergency section, shows that every part of it relates to the
organization, rights, and duties of corporations formed to take
over, maintain, and operate railroads sold under judicial decree,
etc., unless the concluding part of the proviso just quoted is to
be taken as having a broader scope. The appellants contend that it
should be so taken. Read by itself, it gives strong support to the
contention. But can it be rightly separated from the context and
read alone? Does it, when so read, reflect the legislative intent?
In our opinion the answers must be in the negative. The provision
evidently is intended to have the
Page 264 U. S. 89
same scope as the other parts of the act, and to be limited to
the same railroads that they are. The captions used to describe the
subject of the enactment give some support for this view, and the
terms of the emergency section give it further support, for they
make it fairly certain that only railroads sold for debt were in
mind. The fact that the provision is included in a proviso strongly
suggests that it is intended to qualify or restrict what precedes
it, rather than to reach into a larger field, and the suggestion is
emphasized by the first part of the proviso, "that, by such
purchase and organization no rights shall be," etc. A single word,
supplied by fair implication, will bring the provision into full
accord with all that is in the proviso, and with all other parts of
the act. With that word included, the provision will read "nor
shall the main track of any [such] railroad once constructed and
operated be abandoned or removed." To us, it appears very plain
that this is what is intended.
There was no decision on the question in the courts of the state
when the company was incorporated or when it made its investment in
the road. Two decisions made several years later have a bearing,
but seem to leave the matter more or less open even in those
tribunals. One by the Supreme Court, given in 1917, treats the
provision as applicable to all railroads. But the question was not
discussed, possibly because the road there involved had been sold
under a judicial decree. State v. Enid, Ochiltree & Western
108 Tex. 239. The other, by the Court of Civil
Appeals at Galveston, given in 1922, appears to treat the provision
as applicable only to railroads sold for debt. Wexler v.
241 S.W. 231.
As already indicated, we are of opinion that the provision, like
other portions of the enactment of which it is a part, applies only
to railroads sold under judicial decree, etc. This road never was
so sold. The company did not acquire it through such a sale, but
constructed it as an original undertaking.
Page 264 U. S. 90
Our conclusion is that the appellants' reliance on the two
statutes is not well grounded. They are all that are claimed to
make the company's charter other than one of the usual permissive
type. It follows that the district court rightly held the company
was entitled to withdraw the road from intrastate commerce and to
dismantle and abandon it.