A motor carrier and a shipper entered into a written contract
under which the carrier was to transport goods for the shipper by
truck entirely within the Texas. On the basis of that contract, the
carrier obtained from the Texas Railroad Commission a permit to
operate as a contract carrier pursuant to rules promulgated by the
Commission under Texas R.S., Art. 911(b), §§ 1-22(b), granting
regulatory power over transportation. The rules required contract
carriers to charge not less than the rate prescribed for common
motor carriers. Later, pursuant to a prearrangement and without
notice to the Commission, the parties entered into a supplemental
agreement under which the shipper actually paid the carrier lower
rates. About 3 1/2 years later, the carrier sued the shipper in a
Federal District Court to recover the difference between the rate
paid and the full rate fixed by the Commission.
1. This Court cannot say that the District Court sitting in
Texas erred in holding that the cause of action was not barred by
Art. 5526, Tex. R.S., which applies only to actions for debts not
"evidenced by a contract in writing." P. 329 U. S.
2. Nor can this Court say that the District Court and the
Circuit Court of Appeals erred in interpreting the Texas law to
render void and unenforceable the supplemental agreement designed
to circumvent payment of the rates fixed by the Commission. P.
329 U. S.
Page 329 U. S. 434
3. Nor will this Court disturb the interpretation placed upon
purely local law by a District Court sitting in Texas in holding
that the Commission's rate-fixing orders applied to the carrier's
business, that they were not subject to collateral attack in such a
suit, and that the carrier could not lawfully carry the shipper's
goods at lower rates -- especially where these interpretations were
well buttressed by state statutes and court decisions, and the
Circuit Court of Appeals did not disagree with them. P.
329 U. S.
4. Under Texas law, no doctrine of estoppel or pari
can be invoked to defeat payment of the full rate
fixed by the Commission, and a different rule cannot be applied in
the federal courts. Pp. 329 U. S.
154 F.2d 367, reversed.
A carrier sued a shipper in a Federal District Court to recover
the difference between the rate actually paid for the
transportation of goods and a higher rate fixed by the Railroad
Commission of Texas pursuant to Tex. R.S., Art. 911(b), § 1-22(b).
The District Court gave judgment for the carrier. The Circuit Court
of Appeals reversed. 154 F.2d 367. This Court granted certiorari.
328 U.S. 830. The judgment of the Circuit Court of Appeals is
reversed, and that of the District Court is affirmed. P.
329 U. S. 441
MR. JUSTICE BLACK delivered the opinion of the Court.
Petitioner and respondent entered into a written contract under
which the petitioner was to transport goods for respondent by truck
entirely within the Texas at
Page 329 U. S. 435
"such rates, charges, or tariffs as may be fixed by the Railroad
Commission of the Texas." Based on that contract, petitioner
applied to the Commission for a permit to operate as a contract
carrier pursuant to rules of the Railroad Commission promulgated
under Texas law, which grants regulatory power over transportation
to that Commission. Article 911b, §§ 1 to 22b, Rev.Stat. of Tex.
Petitioner's application stated that "the tariff to be charged for
the service proposed will be that as promulgated by the Railroad
Commission of Texas." After notice and hearing at which petitioner
and a representative of respondent testified, the Commission made
an order which stated that, "[a]fter carefully considering the
evidence, the laws, and its own rules and regulations," the
Commission was of the opinion that "the character of business
proposed to be done by the applicant strictly conforms with the
definition of a contract carrier." The order directed that
petitioner be granted a permit, which was later issued, to
transport goods for respondent in Texas, but directed attention to
the fact that the Commission's "tariffs and orders prescribed as a
minimum rate to be charged by contract carriers the rate prescribed
for common motor carriers." Later, pursuant to a prearrangement,
the parties entered a supplemental agreement, concerning which the
Railroad Commission was kept uninformed, in accordance with which
respondent actually paid petitioner for carriage of its goods less
than the rates prescribed for common motor carriers. About three
and a half years later, the petitioner filed this suit, of which
the District Court had jurisdiction by reason of diversity of
citizenship, to recover the full rate fixed by prior general orders
of the Commission prescribing common carrier rates as provided in
The respondent's answer admitted that it had paid less than the
tariff rate fixed in prior general orders, but denied
Page 329 U. S. 436
legal liability to pay that rate on several grounds. It denied
that respondent's rates were governed by the Commission's prior
general rate orders or by the special order granting petitioner a
permit as a contract carrier. It also claimed that a State two-year
statute of limitations barred recovery for part of the amount
claimed. It further alleged that petitioner had led respondent to
believe that his type of transportation was not subject to
regulation by the Railroad Commission, and that no prior general or
special orders had fixed petitioner's transportation rates. In
reliance upon the petitioner's representations, respondent alleged,
it had entered into the supplemental agreement to pay less than the
tariff rate here claimed. Respondent pleaded that, by this conduct,
petitioner was estopped from claiming that the Commission had power
to or had fixed a rate for petitioner's transportation, or from
predicating his cause of action upon the Commission's tariffs.
The District Court rejected all of respondent's contentions.
Citing Texas statutes, court decisions, and the Commission's
practices, the District Court held that the cause of action was not
barred by the statute of limitations; that the Commission's prior
general rate orders governed the charges to be fixed by contract
carriers such as petitioner; that Texas law barred respondent from
any collateral attack on the validity of the orders; that, had the
rate fixing orders been directly attacked, as authorized by law,
they would have been held valid; that shippers and carriers could
not, by private agreements, defeat the State's statutory purpose to
require payments of uniform transportation rates; that the original
agreement to pay the Commission-fixed rate was valid, and the
supplemental agreement to pay less than that rate was void, and
that, under Texas law, petitioner was not estopped to rely on the
Commission's tariff in order to recover the full
Page 329 U. S. 437
tariff rate. Accordingly, the District Court directed the jury
to return a verdict for petitioner for the balance due it under the
Commission rate, and a judgment for the petitioner was entered on
that verdict. [Footnote 1
The Circuit Court of Appeals, one judge dissenting, reversed.
General Mills v. Steele,
154 F.2d 367. The majority
concluded that petitioner should not recover, because the agreement
to pay less than the full rates was a subterfuge, that neither
party had any intention of living up to the agreement, and that
their conduct amounted to a fraud upon the Railroad Commission
"contrary to good morals, and that [it] tended to interfere with
the purity of the administration of the law such as puts both
parties in pari delicto,
with no right to seek advantage
of recovery . . ."
on the "spurious" contract. The dissenting judge did not agree
that the records showed a deliberate purpose to evade the statutes.
He further thought that, under controlling Texas law and policy,
the doctrine of pari delicto
could not be applied so as to
have the goods of a Texas shipper hauled in Texas at a less rate
than the others were compelled to pay by law. All the judges
agreed, however, that the agreement to pay less than the
Commission-fixed rates was void.
Page 329 U. S. 438
On petitioner's motion for rehearing, the State Attorney General
intervened. He contended that the court's decision ran counter to
the State's long established policy against discriminatory
transportation rate-cutting, and that, if the judgment stood, it
would impair the integrity of the State's regulatory system, a
primary purpose of which was, he argued, to assure uniform rates to
all shippers for substantially the same transportation service. In
its opinion denying rehearing, the court reaffirmed its former
holding and stated that this was
"a suit by one party in particeps criminis
another in like situation under a fully executed contract whereon
it was sought to penalize to the extent of $37,000 and to reward
the prime offender in like amount."
Whether the Circuit Court of Appeals' judgment does undermine
the transportation policy of Texas is a question of such importance
that we granted certiorari to review the case. 328 U.S. 830.
The District Court specifically held that no part of the claim
sued on was barred by the Texas statute of limitations, and the
Circuit Court of Appeals did not discuss the question. Article 5526
of the Revised Statutes of Texas, on which respondent relies, by
its language applies only to actions for debts not "evidenced by a
contract in writing." The contract here sued on was "in writing."
Respondent has cited no Texas decisions which have considered this
statute to be a bar to suits on contracts such as the one here
involved. We cannot say that the District Court sitting in Texas
erred in holding that no part of the claim was barred by Article
5526. See Texarkana & Ft. S. R. Co. v. Houston Gas &
121 Tex. 594, 51 S.W.2d 284.
Nor can we say that the District Court and the Circuit Court of
Appeals erred in interpreting Texas law to render the supplemental
agreement between petitioner and respondent designed to circumvent
payment of Commission-fixed rates void and unenforceable. The
Page 329 U. S. 439
Court's holdings that the Commission's rate-fixing orders
applied to petitioner's business, that they were not subject under
Texas law to the collateral attack here made, and that petitioner
could not carry respondent's goods at less than the rates fixed
were well buttressed by state statutes and court decisions.
] No arguments here
made by respondent or state decisions on which it relies refute the
District Court's reasoning or conclusion. The Circuit Court of
Appeals has not disagreed with this holding of the District Court
sitting in Texas. Under these circumstances, we shall leave
undisturbed the interpretation placed upon purely local law by a
Texas federal judge. MacGregor v. State Mutual Life Assurance
Co., 315 U. S. 280
Henderson Co. v. Thompson, 300 U.
, 300 U. S. 266
Thompson v. Consolidated Gas Utilities Co., 300 U. S.
, 300 U. S. 74
Therefore, we can proceed to consider whether the Circuit Court
erred in holding that respondent could escape payment of the
Commission-fixed rates by application of the doctrine of pari
Respondent does not refute what the Texas courts have frequently
decided -- that agreements by railroads to cut charges to below
tariff rates are unlawful, and that no doctrine of estoppel or
can be invoked to defeat payment of the full
tariff rate. In Texas & N.O. R. Co. v. Yates,
89, 93, 161 S.W.2d 1050, 1052, the Texas court said,
"In a word the purpose of our statutes
Page 329 U. S. 440
as they relate to intrastate freight rates, is in every
essential respect the same as that of the Federal statutes which we
had under consideration in Houston & T.C. R. Co. v.
41 S.W.2d 14."
Just as 49 U.S.C. § 41(3), prohibits rebate and similar devices
which might undermine interstate transportation rate systems, so
Art. 1690b, § 1 of the Penal Code of Texas makes it unlawful for
motor carriers to charge less than commission-fixed rates, and Art.
1687 makes it unlawful for railroads to engage in the same
practice. No Texas decisions referred to by the Circuit Court of
Appeals or by the respondent here indicate that the State's public
policy is any different or less effective in protecting the
integrity of motor carrier rates than railroad rates. The Texas
motor carrier legislation was designed to be a part of a state
transportation regulatory system applicable alike to all lines of
transportation, which represents a
"studied effort . . . to prevent, through regulation, unfair,
discriminatory, or destructive competition between such authorized
carriers as would ultimately impair their usefulness."
Texas & P. Ry. Co. v. Railroad Comm'n,
927, 930-931, rev'd on other grounds,
138 Tex. 148, 157
S.W.2d 622. Cf. Stephenson v. Binford, 287 U.
, 287 U. S.
Under Texas law, the payment of commission-fixed carrier rates
is not merely a private obligation between shippers and carriers.
The duty to pay is a public one, Houston & T.C. R. Co. v.
41 S.W.2d 14. And, as said in the Yates
with reference to a railroad, no carrier can,
"by means of estoppel or by any other device' escape the
performance of this public duty." While the doctrine of pari
delicto might be applied in Texas to some types of contracts
so as to defeat recovery, see Wright v. Wight & Wight,
229 S.W. 881, we are satisfied that the Circuit Court of
Page 329 U. S. 441
Appeals erred in holding that Texas courts would apply it in
this case. Application of the doctrine of pari delicto
this proceeding, therefore, where the federal court has
jurisdiction by reason of diversity, would result in applying a
rule of law in the federal courts different from the rule we
believe has been applicable in the state courts. Such a result
cannot be approved. Holmberg v. Armbrecht, 327 U.
The judgment of the Circuit Court of Appeals is reversed, and
that of the District Court is affirmed.
The court permitted respondent to offer evidence intended to
show that the petitioner's contract carriage was neither in
competition with common carriers nor substantially the same type of
services as common carriers performed. This evidence was offered to
support respondent's contention that the Commission was without
jurisdiction to fix petitioner's rates because, as respondent
urged, § 6aa of the State motor carrier law limited its power to
fix contract carrier rates to motor carriers that did compete with
or perform substantially the same services as common carriers.
These two questions were submitted to the jury, and they made
special findings on the issues in respondent's favor. The district
court later directed the jury to find for petitioner despite these
findings, holding, as set out in the opinion, that the Commission's
orders were valid, and beyond collateral attack in this case.
The District Court cited the following authorities to support
its position: Art. 911b, Rev.Stat. of Tex.; General Order No. 1,
R.R. Comm'n of Tex., Aug. 22, 1931; Texas Steel Co. v. Ft.
Worth & Denver C. R. Co.,
120 Tex. 597, 40 S.W.2d 78;
Greer v. Railroad Commission,
117 S.W.2d 142; St.
Louis, I.M. & S. R. Co. v. Landa & Storey,
358; Railroad Commission of Texas v. Uvalde Construction
49 S.W.2d 1113; Alpha Petroleum Co. v. Terrell,
122 Tex. 257, 59 S.W.2d 364; Mingus v. Wadley,
551, 285 S.W. 1084. It also cited the following federal cases:
Burford v. Sun Oil Co., 319 U. S. 315
United Fuel Gas Co. v. Railroad Comm'n, 278 U.