The adequacy or inadequacy of a remedy at law for the protection
of the rights of one entitled upon any ground to invoke the powers
of a federal court is not to be conclusively determined by the
statutes of the particular state in which suit may be brought. One
who is entitled to sue in the federal circuit court may invoke its
jurisdiction in equity whenever the established principles and
rules of equity permit such a suit in that court, and he cannot be
deprived of that right by reason of his being allowed to sue at law
in a state court on the same cause of action.
A suit against individuals for the purpose of preventing them as
officers of a state from enforcing an unconstitutional enactment to
the injury of the rights of the plaintiff is not a suit against the
state within the meaning of the Eleventh Amendment.
Until Congress, in the exercise either of the power specifically
reserved by the eighteenth section of the Act of July 1, 1862,
incorporating the Union Pacific Railroad Company, or its power
under the general reservation made of authority to add to, alter,
amend or repeal that act, prescribes rates to be charged by that
company, it remains with the states through which the road passes
to fix rates for transportation beginning and ending within their
respective limits.
It is settled that --
(1) A railroad corporation is a person within the meaning of the
Fourteenth Amendment declaring that no state shall deprive any
person of property without due process of law, nor deny to any
person within its jurisdiction the equal protection of the
laws.
(2) A state enactment, or regulations made under the authority
of a state enactment, establishing rates for the transportation of
persons or property by railroad that will not admit of the carrier
earning such compensation as under all the circumstances is just to
it and to the public would deprive such carrier of its property
without due process of law, and deny to it the equal protection of
the laws, and would therefore be repugnant to the Fourteenth
Amendment to the Constitution of the United States.
Page 169 U. S. 467
(3) While rates for the transportation of persons and property
within the limits of a state are primarily for its determination,
the question whether they are so unreasonably low as to deprive the
carrier of its property without such compensation as the
Constitution secures, and therefore without due process of law,
cannot be so conclusively determined by the legislature of the
state or by. regulations adopted under its authority that the
matter may not become the subject of judicial inquiry.
The grant to the Legislature in the Constitution of Nebraska of
the power to establish maximum rates for the transportation of
passengers and freight on railroads in that state has reference to
"reasonable" maximum rates, as the words strongly imply that it was
not intended to give a power to fix maximum rates without regard to
their reasonableness, and as it cannot be admitted that the power
granted may be exerted in derogation of rights secured by the
Constitution of the United States, and that the judiciary may not,
when its jurisdiction is properly invoked, protect those
rights.
The idea that any legislature, state or federal, can
conclusively determine for the people and for the courts that what
it enacts in the form of law, or what it authorizes its agents to
do, is consistent with the fundamental law is in opposition to the
theory of our institutions, as the duty rests upon all courts,
federal and state, when their jurisdiction is properly invoked, to
see to it that no right secured by the supreme law of the land is
impaired or destroyed by legislation.
The reasonableness or unreasonableness of rates prescribed by a
state for the transportation of persons and property wholly within
its limits must be determined without reference to the interstate
business done by the carrier, or to the profits derived from that
business. The state cannot justify unreasonably low rates for
domestic transportation, considered alone, upon the ground that the
carrier is earning large profits on its interstate business, over
which, so far as rates are concerned, the state has no control; nor
can the carrier justify unreasonably high rates on domestic
business upon the ground that it will be able only in that way to
meet losses on its interstate business.
A railroad is a public highway, and nonetheless so because
constructed and maintained through the agency of a corporation
deriving its existence and powers from the state. Such a
corporation was created for public purposes. It performs a function
of the state. Its authority to exercise the right of eminent domain
and to charge tolls was given primarily for the benefit of the
public. It is therefore under governmental control -- subject, of
course, to the constitutional guarantees for the protection of its
property. It may not fix its rates with a view solely to its own
interests, and ignore the rights of the public; but the rights of
the public would be ignored if rates for the transportation of
persons or property on a railroad were exacted without reference to
the fair value of the property used for the public or of the
services rendered, and in order simply that the corporation may
meet operating
Page 169 U. S. 468
expenses, pay the interest on its obligations, and declare a
dividend to stockholders.
If a railroad corporation has bonded its property for an amount
that exceeds its fair value, or if its capitalization is largely
fictitious, it may not impose upon the public the burden of such
increased rates as may be required for the purpose of realizing
profits upon such excessive valuation or fictitious capitalization,
and the apparent value of the property and franchises used by the
corporation, as represented by its stocks, bonds and obligations,
is not alone to be considered when determining the rates that may
be reasonably charged.
A corporation maintaining a public highway, although it owns the
property it employs for accomplishing public objects, must be held
to have accepted its rights, privileges and franchises subject to
the condition that the government creating it, or the government
within whose limits it conducts its business, may by legislation
protect the people against the exaction of unreasonable charges for
the services rendered by it, but it is equally true that the
corporation performing such public services, and the people
financially interested in its business and affairs, have rights
that may not be invaded by legislative enactment in disregard of
the fundamental guarantees for the protection of property.
The basis of all calculations as to the reasonableness of rates
to be charged by a corporation maintaining a highway under
legislative sanction must be the fair value of the property being
used by it for the convenience of the public, and in order to
ascertain that value, the original cost of construction, the amount
expended in permanent improvements, the amount and market value of
its bonds and stock, the present as compared with the original cost
of construction, the probable earning capacity of the property
under particular rates prescribed by statute, and the sum required
to meet operating expenses, are all matters for consideration, and
are to be given such weight as maybe just and right in each case.
What the company is entitled to ask is a fair return upon the value
of that which it employs for the public convenience, and on the
other hand, what the public is entitled to demand is that no more
be exacted from it for the use of a public highway than the
services rendered by it are reasonably worth.
The effect of the Nebraska statute of 1893, entitled
"An act to regulate railroads, to classify freights, to fix
reasonable maximum rates to be charged for the transportation of
freights upon each of the railroads in the State of Nebraska, and
to provide penalties for the violation of this act,"
is to deprive each of the companies involved in these suits of
the just compensation secured to them by the Constitution of the
United States, and therefore the decree below restraining its
enforcement was correct.
If the circuit court finds that the present condition of
business is such as to admit of the application of the statute to
the railroad companies in question without depriving them of just
compensation, it will be its duty to discharge the injunction
heretofore granted, and to make whatever
Page 169 U. S. 469
order is necessary to remove any obstruction placed by the
decrees in these cases in the way of the enforcement of the
statute.
The appellees in the first of the above cases were the
plaintiffs below, and are citizens of Massachusetts, and
stockholders of the Union Pacific Railway Company. They sue on
behalf of themselves and all others similarly situated. The
defendants are the Union Pacific Railway Company; the St. Joseph
and Grand Island Railroad Company, the Omaha and Republican Valley
Railroad Company, and the Kansas City and Omaha Railroad Company --
corporations of Nebraska under the control of the Union Pacific
Railway Company; certain persons, citizens of Nebraska, who hold
the offices, respectively, of Attorney General, Secretary of State,
Auditor of Public Accounts, State Treasurer, and Commissioner of
Public Lands and buildings, and constitute the State Board of
Transportation, and James C. Dahlman, Joseph W. Edgerton, and
Gilbert L.Laws, citizens of Nebraska, and Secretaries of that
board. By a supplemental bill in the same suit, certain persons,
receivers of the Union Pacific Railway Company, were made
defendants.
In the second case, some of the plaintiffs, appellees here, are
subjects of Queen Victoria, while the others are citizens of
Massachusetts. They are all stockholders of the Chicago and
Northwestern Railroad Company, a corporation organized and existing
under the laws of Illinois, Wisconsin, and Iowa, and have sued in
that capacity on behalf of themselves and all others similarly
situated. The defendants are the Chicago and Northwestern Railroad
Company; the Fremont, Elkhorn and Missouri Valley Railroad Company,
a Nebraska corporation, and the Chicago, St. Paul, Minneapolis and
Omaha Railway Company a corporation organized under the laws of
Minnesota and Nebraska, both under the control of the Chicago and
Northwestern Railroad Company, and the above officers constituting
the State Board of Transportation, as well as those holding the
positions of Secretaries of that board.
In the third case, the appellees Henry L. Higginson and others,
citizens of Massachusetts, were the plaintiffs below. They sued on
behalf of themselves and all other stockholders
Page 169 U. S. 470
of the Chicago, Burlington and Quincy Railroad Company, a
corporation organized and existing under the laws of Illinois and
Iowa, and whose lines west of the Missouri River are known as the
Burlington and Missouri Road. The defendants are the Chicago,
Burlington and Quincy Railroad Company, the persons composing the
Nebraska State Board of Transportation, and the Secretaries of that
board.
For the sake of brevity, the Union Pacific Railway Company will
be called the "Union Pacific Company," the St. Joseph and Grand
Island Railroad Company the "St. Joseph Company," the Omaha and
Republican Valley Railroad Company the "Omaha Company," the Kansas
City and Omaha Railroad Company the "Kansas City Company," the
Fremont, Elkhorn and Missouri Valley Railroad Company the "Fremont
Company," the Chicago, St. Paul, Minneapolis and Omaha Railway
Company the "St. Paul Company," and the Chicago, Burlington and
Quincy Railroad Company the "Burlington Company."
Each of these suits was brought July 28, 1893, and involves the
constitutionality of an act of the Legislature of Nebraska approved
by the Governor April 12, 1893, and which took effect August 1,
1893. It was an act
"to regulate railroads, to classify freights, to fix reasonable
maximum rates to be charged for the transportation of freights upon
each of the railroads in the State of Nebraska, and to provide
penalties for the violation of this act."
Acts of Nebraska, 1893, c. 24; Compiled Statutes of Nebraska,
1893, c. 72, art. 12. The act is referred to in the record as
"House Roll 33."
Prior to the enactment of that statute, the legislature passed
an act to regulate railroads, prevent unjust discrimination,
provide for a Board of Transportation, and define its duties, and
repeal articles 5 and 8 of chapter 72, entitled "Railroads," of the
Revised Statutes of Nebraska, and all acts and parts of acts in
conflict therewith, the same being chapter 60 of the Session Laws
of 1887, and now article 8 of chapter 72 of the Compiled Statutes
of Nebraska of 1893. By that act, the Attorney General, Secretary
of State, Auditor of Public Accounts, State Treasurer, and
Commissioner of Public Lands
Page 169 U. S. 471
and Buildings were constituted a Board of Transportation, with
power to appoint three Secretaries to assist in the performance of
its duties and with authority to inquire into the management of the
business of all common carriers subject to its provisions and
obtain from them the full and complete information necessary to
enable the board to perform its duties and carry out the objects
for which it was created. It was also provided that, for the
purposes of the act, the Board should have power to require the
attendance and testimony of witnesses and the production of all
books, papers, contracts, agreements, and documents relating to any
matter under investigation, and to that end could invoke the aid of
any of the district courts or of the supreme court of the state,
and that any court of competent jurisdiction in which such inquiry
was carried on could, in case of contumacy or refusal to obey a
subpoena issued to any common carrier or person subject to the
provisions of the act, issue an order requiring such carrier or
other person to appear before the Board (and produce books and
papers, if ordered), and give evidence touching the matter in
question, and any failure to obey the order was punishable by the
court as for contempt. The claim that any testimony or evidence
might tend to criminate the person giving evidence would not excuse
the witness from testifying, but such evidence or testimony could
not be used against him on the trial of any criminal
proceeding.
The power to enact the statute whose validity is now assailed --
that is, the above statute of August 1, 1893, regulating railroads,
classifying freights, fixing reasonable maximum rates, etc., in
Nebraska -- was referred by counsel to the general legislative
power of the state, as well as to the fourth section of Article XI
of the state constitution which provides:
"Railways heretofore constructed, or that may hereafter be
constructed in this state, are hereby declared public highways, and
shall be free to all persons for the transportation of their
persons and property thereon, under such regulations as may be
prescribed by law. And the legislature may from time to time pass
laws establishing reasonable maximum rates of charges for the
transportation of passengers and freight on
Page 169 U. S. 472
the different railroads in this state. The liability of railroad
corporations as common carriers shall never be limited."
By the first section of that statute, it is declared that,
except as therein otherwise provided, its provisions shall apply to
all railroad corporations, railroad companies, and common carriers
engaged in Nebraska in the transportation of freight by railroad
therein, and also to shipments of property made from any point
within the state to any other point within its limits. That section
provides.
"The term 'railroad,' as used in this act, shall include all
bridges and ferries used or operated in connection with any
railroad, and also all the road in use by any corporation,
receiver, trustee or other person operating a railroad whether
owned or operated under contract, agreement, lease or otherwise,
and the term 'transportation' shall include all instrumentalities
of shipment or carriage, and the term 'railroad corporation'
contained in this act shall be deemed and taken to mean all
corporations, companies or individuals, now owning or operating, or
which may hereafter own or operate, any railroad, in whole or in
part, in this state, and the provisions of this act, except as in
this act other wise provided, shall apply to all persons, firm and
companies, and to all associations of persons, whether incorporated
or otherwise that shall do business as common carrier of freight
upon any of the lines of railway in this state, the same as to
railroad corporations herein mentioned."
§ 1.
The second section provides that all freight or property to be
transported by any railroad company or companies mentioned in the
first section
"from any point in the State of Nebraska to any other point in
said state shall be classified as hereinafter in this section
provided, and any other or different classification of freight
which would raise the rates on class or commodity of freights above
the rates prescribed in this act, except as hereinafter otherwise
provided, is prohibited and declared to be unlawful. The
classification established by this act shall be known as the
'Nebraska Classification.' Freights shall be billed at the actual
weight unless otherwise directed in the classification -- twenty
thousand pounds shall
Page 169 U. S. 473
be a carload, and all excessive weights shall be at the same
rate per hundred pounds, except in carloads of light and bulky
articles, and unless otherwise specified in the classification.
When the classification makes an article 'released' or 'owner's
risk,' the same at carrier's risk will be the next highest rate
higher, unless otherwise provided in the classification. Articles
rated first class, 'released' or owner's risk, if taken at
'carrier's risk,' will be 1 1/2 times first class unless otherwise
provided in the classification. All articles carried according to
this classification at 'owner's risk' of fire, leakage, damage or
breakage must be so receipted for by agents of the railroad, and so
considered by owners and shippers. Signing a release contract by a
shipper shall not release the railroad company for loss or damages
caused by carelessness or negligence of its employees."
§ 2.
Following this section, in the body of the statute, are tables
of the classification of freights.
The third section is in these words:
"That each of the railroads in the State of Nebraska shall
charge for the transportation of freight from any point in said
state to any other point in said state, no higher or greater rate
of charge than is by this act fixed as the reasonable maximum rate
for the distance hauled, and the reasonable maximum rates for the
transportation of freight by railroad from any point in the State
of Nebraska to any other point in said state are declared and
established to be as hereinafter in this section fixed for the
distance named, and any higher or greater rate for the distance
hauled than that herein fixed and established is prohibited and
declared to be unlawful, and the reasonable maximum rate herein
fixed and established shall be known as the 'Nebraska Schedule of
Reasonable Maximum Rates.'"
§ 3.
Here follow tables of the rates prescribed by the statute.
That the full scope of the act may appear, its remaining
sections are given as follows:
"§ 4. All railroads or parts thereof which have been built in
this state since the 1st day of January 1889, or may be built
before the 31st day of December 1899, shall be exempt
Page 169 U. S. 474
from the provisions of this act until the 31st day of December
1899."
"§ 5. Whenever any railroad company or companies in this state
shall in a proper action show by competent testimony that the
schedule of rates prescribed by the act are unjust and
unreasonable, such railroad or railroads shall be exempt therefrom
as hereinafter provided. All such actions shall be brought before
the Supreme Court, in the name of the railroad company or companies
bringing the same, and against the State of Nebraska, and upon the
hearing thereof, if the court shall become satisfied that the rates
herein prescribed are unjust insofar as they relate to the railroad
bringing the action, [it] may issue their [its] order directing the
Board of Transportation to permit such railroad to raise its rates
to any sum in the discretion of the Board:
provided that
in no case shall the rates so raised be fixed at a higher sum than
that charged by such railroad on the first day of January 1893.
Whenever any railroad company in this state shall claim the benefit
of the provisions of this section, it shall be the duty of such
railroad company to show to the court all matters pertaining to the
management thereof, and if it shall appear that said railroad
company is operating branch lines of railroad in connection with
its main line, and all included in one system, then, in that case,
it shall be the duty of the railroad company to show to the court
upon which branch or branches, or upon which portion of such system
the schedule of rates prescribed in this act is unjust and
unreasonable, and only such portions shall be exempted from the
provisions thereof:
provided that in no case shall a
railroad company be allowed to pool the earnings of all the lines
operated under one management, where more than one line is so
operated, for the purpose of lowering the general average."
"§ 6. That the Board of Transportation is hereby empowered and
directed to reduce the rates on any class or commodity in the
schedule of rates fixed in this act whenever it shall seem just and
reasonable to a majority of said Board so to reduce any rate, and
said Board of Transportation is hereby empowered and directed to
revise said classification of
Page 169 U. S. 475
freight as hereinbefore in this act established, whenever it
shall appear to a majority of said Board just and reasonable to
revise said classification:
provided that said Board of
Transportation shall never change the classification in the act
established, so that, by such change or classification the rates on
any freight will become higher or greater than in this act fixed.
When any reduction of rates or revision of classification shall be
made by said Board, it shall be the duty of said Board to cause
notice thereof to be published two successive weeks in some public
newspaper, published in the City of Lincoln, in this state, which
notice shall state the date of the taking effect of such change of
rate or classification, and said change of rate or classification
so made by the said Board and published in said notice, shall take
effect at the time so stated in said notice."
"§ 7. That articles not enumerated in said classification in
section two of this act established, not rated in said schedule of
rates in section three of this act, shall be classed with analogous
articles in said classification, and where there is any conflict
between said classification and said schedule of maximum rates,
said rates shall govern."
"§ 8. That in case any common carrier subject to the provisions
of this act shall do, or cause to be done, or permit to be done,
any act, matter, or thing in this act prohibited or declared to be
unlawful, or shall omit to do any act, matter, or thing in this act
required to be done, such common carrier shall be liable to the
person or persons injured thereby for all damages sustained in
consequence of any such violation of the provisions of this act,
together with cost of suit and a reasonable counsel or attorney's
fee, to be fixed by the court in which the same is heard on appeal
or otherwise, which shall be taxed and collected as part of the
costs in the case:
provided that in all cases, demand in
writing on said common carrier shall be made for the money damages
sustained before suit is brought for recovery under this section,
and that no suit shall be brought until the expiration of fifteen
days after such demand"
"§ 9. That in case any common carrier subject to the
provisions
Page 169 U. S. 476
of this act shall do, or cause to be done, or permit to be done,
any act, matter or thing in this act prohibited or declared to be
unlawful, or shall omit to do any act, matter or thing in this act
required to be done, such common carrier shall, upon conviction
thereof, be fined in any sum not less than one thousand dollars,
nor more than five thousand dollars for the first offense, and for
the second offense not less than five thousand dollars, nor more
than ten thousand dollars, and for the third offense, not less than
ten thousand dollars, nor more than twenty thousand dollars, and
for every subsequent offense and conviction thereof, shall be
liable to a fine of twenty-five thousand dollars: provided, that in
all cases under this act either party shall have the right of trial
by jury."
"§ 10. All acts and parts of acts inconsistent herewith are
repealed."
These cases were heard at the same time, and in the one in which
the Union Pacific Company, the St. Joseph Company, the Omaha
Company, and the Kansas City Company were defendants it was
adjudged in the circuit court -- MR. JUSTICE BREWER presiding -- as
follows:
"That the said railroad companies, and each and every of them,
and said receivers, be perpetually enjoined and restrained from
making or publishing a schedule of rates to be charged by them, or
any or either of them, for the transportation of freight on and
over their respective roads in this state from one point to another
therein, whereby such rate shall be reduced to those prescribed by
the act of the legislature of this state, called in the bill filed
therein, 'House Roll 33,' and entitled 'An act to regulate
railroads, to classify freights, to fix reasonable maximum rates to
be charged for the transportation of freight upon each of the
railroads in the State of Nebraska, and to provide penalties for
the violation of this act,' approved April 12, 1893, and below
those now charged by said companies, or either of them, or their
receivers, or in any wise obeying, observing, or conforming to the
provisions, commands, injunctions, and prohibitions of said alleged
act, and that the Board of Transportation of said state and the
members and Secretaries
Page 169 U. S. 477
of said Board be in like manner perpetually enjoined and
restrained from entertaining, hearing, or determining any complaint
to it against said railroad companies, or any or either of them or
their receivers, for or on account of any act or thing by either of
said companies or their receivers, their officers, agents,
servants, or employees, done, suffered, or omitted, which may be
forbidden or commanded by said alleged act, and from instituting or
prosecuting, or causing to be instituted or prosecuted, any action
or proceeding, civil or criminal, against either of said companies
or their receivers for any act or thing done, suffered or omitted,
which may be forbidden or commanded by said act, and particularly
from reducing its present rates of charges for transportation of
freight to those prescribed in said act, and that the Attorney
General of this state be in like manner enjoined from bringing,
aiding in bringing, or causing to be brought, any proceeding by way
of injunction, mandamus, civil action, or indictment against said
companies, or either of them, or their receivers, for or on account
of any action or omission on their part commanded or forbidden by
the said act, and that a writ of injunction issue out of this
Court, and under the seal thereof, directed to the said defendants,
commanding, enjoining, and restraining them as hereinbefore set
forth, which injunction shall be perpetual save as is hereinafter
provided. And it is further declared, adjudged, and decreed that
the act above entitled is repugnant to the Constitution of the
United States forasmuch as by the provisions of said act the said
defendant railroad companies may not exact for the transportation
of freight from one point to another within this state charges
which yield to the said companies, or either of them, reasonable
compensation for such services. It is further ordered, adjudged,
and decreed that the defendant members of the Board of
Transportation of said state may hereafter, when the circumstances
have changed so that the rates fixed in the said act shall yield to
the said companies' reasonable compensation for the services
aforesaid, apply to this Court by supplemental bill or otherwise,
as they may be advised, for a further order in that behalf. It is
further ordered, adjudged, and
Page 169 U. S. 478
decreed that the plaintiffs recover of the said defendants their
costs to be taxed by the clerk."
The above decree was in accordance with the prayer for relief. A
similar decree was rendered in each of the other cases.
The present appeals were prosecuted by the defendants
constituting the State Board of Transportation, as well as by the
defendants who are Secretaries of that Board.
Page 169 U. S. 515
MR. JUSTICE HARLAN delivered the opinion of the Court.
The first question to be considered is one common to all the
cases. While it was not objected at the argument that there had
been any departure from the ninety-fourth equity rule, it was
contended that the plaintiffs had an adequate remedy at law, and
that the circuit court of the United States, sitting in equity, was
therefore without jurisdiction. This objection is
Page 169 U. S. 516
based upon the fifth section of the Nebraska statute,
authorizing any railroad company to show, in a proper action
brought in the Supreme Court of the state, that the rates therein
prescribed are unreasonable and unjust, and, if that court found
such to be the fact, to obtain an order upon the Board of
Transportation permitting the rates to be raised to any sum in the
discretion of that Board, provided that in no case should they be
fixed at a higher sum than was charged by the company on the first
day of January, 1893. This section, it is contended, took from the
circuit court of the United States its equity jurisdiction in
respect to the rates prescribed and required the dismissal of the
bills.
We cannot accept this view of the equity jurisdiction of the
circuit courts of the United States. The adequacy or inadequacy of
a remedy at law for the protection of the rights of one entitled
upon any ground to invoke the powers of a federal court is not to
be conclusively determined by the statutes of the particular state
in which suit may be brought. One who is entitled to sue in the
federal circuit court may invoke its jurisdiction in equity
whenever the established principles and rules of equity permit such
a suit in that court, and he cannot be deprived of that right by
reason of his being allowed to sue at law in a state court on the
same cause of action. It is true that an enlargement of equitable
rights arising from the statutes of a state may be administered by
the circuit courts of the United States.
Case of
Broderick's Will, 21 Wall. 503,
88 U. S. 520;
Holland v. Challen, 110 U. S. 15,
110 U. S. 24;
Dick v. Foraker, 155 U. S. 404,
155 U. S. 415;
Bardon v. Land & River Imp. Co., 157 U.
S. 327,
157 U. S. 330;
Rich v. Braxton, 158 U. S. 375,
158 U. S. 405.
But if the case, in its essence, be one cognizable in equity, the
plaintiff -- the required value being in dispute -- may invoke the
equity powers of the proper circuit court of the United States
whenever jurisdiction attaches by reason of diverse citizenship, or
upon any other ground of federal jurisdiction.
Payne v.
Hook, 7 Wall. 425,
74 U. S. 430;
McConihay v. Wright, 121 U. S. 201,
121 U. S. 205.
A party, by going into a national court, does not, this Court has
said, lose any right or appropriate remedy of which he
Page 169 U. S. 517
might have availed himself in the state courts of the same
locality; that the wise policy of the Constitution gives him a
choice of tribunals.
Davis v. Gray,
16 Wall. 203,
83 U. S. 221;
Cowley v. Northern Pacific Railroad, 159 U.
S. 569,
159 U. S. 583.
So,
"whenever a citizen of a state can go into the courts of a state
to defend his property against the illegal acts of its officers, a
citizen of another state may invoke the jurisdiction of the federal
courts to maintain a like defense. A state cannot tie up a citizen
of another state, having property rights within its territory,
invaded by unauthorized acts of its own officers, to suits for
redress in its own courts."
Reagan v. Farmers' Loan & Trust Co., 154 U.
S. 362,
154 U. S. 391;
Mississippi Mills v. Cohn, 150 U.
S. 202,
150 U. S. 204;
Cowles v. Mercer
County, 7 Wall. 118;
Lincoln County v.
Luning, 133 U. S. 529;
Scott v. Neely, 140 U. S. 106;
Chicot County v. Sherwood, 148 U.
S. 529;
Cates v. Allen, 149 U.
S. 451.
In these cases, the plaintiffs, stockholders in the corporations
named, ask a decree enjoining the enforcement of certain rates for
transportation upon the ground that the statute prescribing them is
repugnant to the Constitution of the United States. Under the
principles which in the federal system distinguish cases in law
from those in equity, the circuit court of the United States,
sitting in equity, can make a comprehensive decree covering the
whole ground of controversy, and thus avoid the multiplicity of
suits that would inevitably arise under the statute. The carrier is
made liable not only to individual persons for every act, matter,
or thing prohibited by the statute, and for every omission to do
any act, matter, or thing required to be done, but to a fine of
from $1,000 to $5,000 for the first offense, from $5,000 to $10,000
for the second offense, from $10,000 to $20,000 for the third
offense, and $25,000 for every subsequent offense. The transactions
along the line of any one of these railroads, out of which causes
of action might arise under the statute, are so numerous and varied
that the interference of equity could well be justified upon the
ground that a general decree, according to the prayer of the bills,
would avoid a multiplicity
Page 169 U. S. 518
of suits, and give a remedy more certain and efficacious than
could be given in any proceeding instituted against the company in
a court of law, for a court of law could only deal with each
separate transaction involving the rates to be charged for
transportation. The transactions of a single week would expose any
company questioning the validity of the statute to a vast number of
suits by shippers, to say nothing of the heavy penalties named in
the statute. Only a court of equity is competent to meet such an
emergency, and determine once for all, and without a multiplicity
of suits, matters that affect not simply individuals, but the
interests of the entire community as involved in the use of a
public highway and in the administration of the affairs of the
quasi-public corporation by which such highway is
maintained.
Another question of a preliminary character must be here
noticed. The answer of the officers of the state in each case
insists that the real party in interest is the state, and that
these suits are, in effect, suits against the state, of which the
circuit court of the United States cannot take jurisdiction
consistently with the eleventh amendment of the Constitution of the
United States. This point is, perhaps, covered by the general
assignments of error, but it was not discussed at the bar by the
representatives of the State Board. It would therefore be
sufficient to say that these are cases of which, so far as the
plaintiffs are concerned, the circuit court has jurisdiction not
only upon the ground of the diverse citizenship or alienage of the
parties, but upon the further ground that, as the statute of
Nebraska under which the State Board of Transportation proceeds is
assailed as being repugnant to rights secured to the plaintiffs by
the Constitution of the United States, the cases may be regarded as
arising under that instrument. But, to prevent misapprehension, we
add that within the meaning of the Eleventh Amendment of the
Constitution, the suits are not against the state, but against
certain individuals charged with the administration of a state
enactment, which, it is alleged, cannot be enforced without
violating the constitutional rights of the plaintiffs. It is the
settled doctrine of this Court that a suit against individuals
for
Page 169 U. S. 519
the purpose of preventing them as officers of a state from
enforcing an unconstitutional enactment to the injury of the rights
of the plaintiff, is not a suit against the state within the
meaning of that amendment.
Pennoyer v. McConnaughy,
140 U. S. 1,
140 U. S. 10;
In re Tyler, 149 U. S. 164,
149 U. S. 190;
Scott v. Donald, 165 U. S. 58,
165 U. S. 68;
Tindal v. Wesley, 167 U. S. 204,
167 U. S.
220.
An important question is presented that relates only to the
Union Pacific Company. That company is a corporation formed by the
consolidation of several companies under the authority of acts of
Congress, one of the constituent companies being the Union Pacific
Railroad Company, incorporated by the Act of July 1, 1862, 12 Stat.
489, c. 120.
United States v. Union Pacific Railway,
160 U. S. 1,
160 U. S. 6.
Neither that company nor the Union Pacific Railroad Company is
named in the Nebraska statute, but the statute is interpreted by
the State Board of Transportation as embracing the present
defendant corporation. It is contended that the state is without
power to fix or limit the rates that the Union Pacific Company may
charge for the transportation of freight on its lines between
points within Nebraska. This contention rests: 1. upon the
provisions of the acts of Congress showing that the Union Pacific
Railroad Company was created for the accomplishment of national
objects, namely, to secure the safe and speedy transportation of
the mails, troops, munitions of war, and public stores of the
United States; 2. upon the eighteenth section of the above Act of
July 1, 1862, 12 Stat. 489, 497, c. 120, providing that
"whenever it appears that the net earnings of the entire road
and telegraph, including the amount allowed for services rendered
for the United States, after deducting all expenditures, including
repairs and the furnishing and running and managing of said road,
shall exceed ten percentum upon its cost, exclusive of the five
percentum to be paid to the United States, Congress may reduce the
rates of fare thereon, if unreasonable in amount, and may fix and
establish the same by law."
The argument is that Congress by this enactment has reserved to
itself exclusive control of rates, interstate and local, to be
charge on the Union Pacific Railroad. As this view, if maintained,
would require
Page 169 U. S. 520
an affirmance of the decree so far as the Union Pacific Company
is concerned, whether the Nebraska statute of 1893 be
constitutional or not as to the other railroad corporations, it
cannot properly be passed without examination.
In
Reagan v. Mercantile Trust Co., 154 U.
S. 413, the question arose whether the Texas and Pacific
Railway Company, a corporation organized under the laws of the
United States, was subject to the laws of Texas with respect to
rates for transportation wholly within that state. The ground upon
which exemption from state control was there asserted by the
company was that it received all its franchises from Congress,
including the franchise to charge and collect tolls. This Court,
conceding, for the purposes of that case, that Congress had power
to remove the corporation in all its operations from state control,
held that the act creating it did not show an intention upon the
part of Congress to exempt it from the duty to conform form to such
reasonable rates for local transportation as the state might
prescribe, and that the enforcement by the state of reasonable
rates for such transportation would not disable the corporation
from performing the duties and exercising the powers imposed upon
it by Congress. The Court said:
"By the act of incorporation, Congress authorized the company to
build its road through the State of Texas. It knew that, when
constructed, a part of its business would be the carrying of
persons and property from points within the state to other points
also within the state, and that in so doing it would be engaged in
a business, control of which is nowhere by the federal Constitution
given to Congress. It must have been known that in the nature of
things, the control of that business would be exercised by the
state, and, if it deemed that the interests of the nation and the
discharge of the duties required on behalf of the nation from this
corporation demanded exemption in all things from state control, it
would unquestionably have expressed such intention in language
whose meaning would be clear. Its silence in this respect is
satisfactory assurance that insofar as this corporation should
engage in business wholly within the state, it intended that it
should be subjected to the ordinary control
Page 169 U. S. 521
exercised by the state over such business. Without therefore
relying at all upon any acceptance by the railroad corporation of
the act of the legislature of the state, passed in 1873, in respect
to it, we are of opinion that the Texas and Pacific Railway Company
is, as to business done wholly within the state, subject to the
control of the state in all matters of taxation, rates, and other
police regulations."
This conclusion, as may be observed from the opinion, was based
in part upon the reasoning in
Thomson v. Pacific
Railroad, 9 Wall. 579, and in
Railroad
Company v. Peniston, 18 Wall. 5, in which cases it
was held that the property of certain railroad companies was not
exempt from state taxation by reason alone of the fact that they
were organized under acts of Congress for the accomplishment of
national objects, and that the imposition of such taxes was not, in
a constitutional sense, an obstruction to the exercise of the
powers of the general government, nor an interference with the
discharge of the duties required of the companies by their
charters.
In the present case, the question is more difficult of solution
by reason of the declaration in the above Act of July 1, 1862 (no
similar declaration being made in the act incorporating the Texas
and Pacific Railway Company), that Congress may reduce the rates of
fare on the Union Pacific Railroad if unreasonable in amount, and
may fix and establish the same by law whenever the net earnings of
the entire road and telegraph, ascertained upon a named basis,
should exceed ten percentum upon its cost, exclusive of the five
percentum to be paid to the United States.
Undoubtedly Congress intended by that act to reserve such power
as was necessary to prevent the corporation from exacting rates
that were unreasonable. But this is not equivalent to a declaration
that the states through which the railroad might be constructed
should not regulate rates for transportation begun and completed
within their respective limits.
It cannot be doubted that the making of rates for transportation
by railroad corporations along public highways
Page 169 U. S. 522
between points wholly within the limits of a state, is a subject
primarily within the control of that state. And it ought not to be
supposed that Congress intended that, so long as it forbore to
establish rates on the Union Pacific Railroad, the corporation
itself could fix such rates for transportation as it saw proper,
independently of the right of the states through which the road was
constructed to prescribe regulations for transportation beginning
and ending within their respective limits. On the contrary, the
better interpretation of the Act of July 1, 1862, is that the
question of rates for wholly local business was left under the
control of the respective states through which the Union Pacific
Railroad might pass, with power reserved to Congress to intervene
under certain circumstances, and fix the rates that the corporation
could reasonably charge and collect. Congress not having exerted
this power, we do not think that the national character of the
corporation constructing the Union Pacific Railroad stands in the
way of a state prescribing, rates for transporting property on that
road wholly between points within its territory. Until Congress, in
the exercise either of the power specifically reserved by the
eighteenth section of the act of 1862, or its power under the
general reservation made of authority to add to, alter, amend, or
repeal that act, prescribes rates to be charged by the railroad
company, it remains with the states through which the road passes
to fix rates for transportation beginning and ending within their
respective limits.
We are now to inquire whether the Nebraska statute is repugnant
to the Constitution of the United States.
By the Fourteenth Amendment, it is provided that no state shall
deprive any person of property without due process of law, nor deny
to any person within its jurisdiction the equal protection of the
laws. That corporations are persons within the meaning of this
amendment is now settled.
Santa Clara County v. Southern
Pacific Railroad, 118 U. S. 394,
118 U. S. 396;
Charlotte, Columbia & Augusta Railroad v. Gibbes,
142 U. S. 386,
142 U. S. 391;
Gulf, Colorado & Santa Fe Railway v. Ellis,
165 U. S. 150,
165 U. S. 154.
What amounts to deprivation of property without due process of law,
or what is a denial of the equal
Page 169 U. S. 523
protection of the laws, is often difficult to determine,
especially where the question relates to the property of a
quasi-public corporation, and the extent to which it may
be subjected to public control. But this Court, speaking by Chief
Justice Waite, has said that while the state has power to fix the
charges by railroad companies for the transportation of persons and
property within its own jurisdiction, unless restrained by valid
contract, or unless what is done amounts to a regulation of foreign
or interstate commerce, such power is not without limit, and
that
"under pretense of regulating fares and freights, the state
cannot require a railroad corporation to carry persons or property
without reward, neither can it do that which in law amounts to the
taking of private property for public use without just
compensation, or without due process of law."
Railroad Commission Cases, 116 U.
S. 307,
116 U. S. 325,
116 U. S. 331.
This principle was recognized in
Dow v. Beidelman,
125 U. S. 680,
125 U. S. 689,
and has been reaffirmed in other cases. In
Georgia Railroad
& Banking Co. v. Smith, 128 U. S. 174,
128 U. S. 179,
it was said that the power of the state to prescribe the charges of
a railroad company for the carriage of persons and merchandise
within its limits -- in the absence of any provision in the charter
of the company constituting a contract vesting it with authority
over those matters -- was
"subject to the limitation that the carriage is not required
without reward, or upon conditions amounting to the taking of
property for public use without just compensation, and that what is
done does not amount to a regulation of foreign or interstate
commerce."
In
Chicago, Milwaukee & St. Paul Railway v.
Minnesota, 134 U. S. 418,
134 U. S. 458,
it was said:
"If the company is deprived of the power of charging reasonable
rates for the use of its property, and such deprivation takes place
in the absence of an investigation by judicial machinery, it is
deprived of the lawful use of its property, and thus, in substance
and effect, of the property itself, without due process of law, and
in violation of the Constitution of the United States, and, insofar
as it is thus deprived, while other persons are permitted to
receive reasonable profits upon their invested capital, the company
is deprived of the equal protection
Page 169 U. S. 524
of the laws."
In
Chicago & Grand trunk Railway v. Wellman,
143 U. S. 339,
143 U. S. 344,
the Court, in answer to the suggestion that the legislature had no
authority to prescribe maximum rates for railroad transportation,
said that "the legislature has power to fix rates, and the extent
of judicial interference is protection against unreasonable rates."
In
Budd v. New York, 143 U. S. 517, the
court, while sustaining the power of New York by statute to
regulate charges to be exacted at grain elevators and warehouses in
that state, took care to state, as a result of former decisions,
that such power was not one
"to destroy or a power to compel the doing of the services
without reward, or to take private property for public use without
just compensation or without due process of law."
In
Reagan v. Farmers' Loan & Trust Co.,
154 U. S. 362,
154 U. S. 399,
which involved the validity of certain rates for freights and
passengers prescribed by a railroad commission established by an
act of the Legislature of Texas, this Court, after referring to the
above cases, said:
"These cases all support the proposition that, while it is not
the province of the courts to enter upon the merely administrative
duty of framing a tariff of rates for carriage, it is within the
scope of judicial power, and a part of judicial duty, to restrain
anything which, in the form of a regulation of rates, operates to
deny to the owners of property invested in the business of
transportation that equal protection which is the constitutional
right of all owners of other property. There is nothing new or
strange in this. It has always been a part of the judicial function
to determine whether the act of one party (whether that party be a
single individual, an organized body, or the public as a whole)
operates to divest the other party of any rights of person or
property. In every constitution is the guaranty against the taking
of private property for public purposes without just compensation.
The equal protection of the laws, which, by the Fourteenth
Amendment, no state can deny to the individual, forbids
legislation, in whatever form it may be enacted, by which the
property of one individual is, without compensation, wrested from
him for the benefit of another or of the
Page 169 U. S. 525
public. This, as has been often observed, is a government of
law, and not a government of men, and it must never be forgotten
that, under such a government, with its constitutional limitations
and guaranties, the forms of law and the machinery of government,
with all their reach and power, must, in their actual workings,
stop on the hither side of the unnecessary and uncompensated taking
or destruction of any private property legally acquired and legally
held. It was therefore within the competency of the Circuit Court
of the United States for the Western District of Texas at the
instance of the plaintiff, a citizen of another state, to enter
upon an inquiry as to the reasonableness and justice of the rates
prescribed by the railroad commission. Indeed, it was in so doing
only exercising a power expressly named in the act creating the
commission."
So, in
St. Louis & San Francisco Railway v. Gill,
156 U. S. 649
156 U. S. 657,
it was said that
"there is a remedy in the courts for relief against legislation
establishing a tariff of rates which is so unreasonable as to
practically destroy the value of property of companies engaged in
the carrying business, and that especially may the courts of the
United States treat such a question as a judicial one, and hold
such acts of legislation to be in conflict with the Constitution of
the United States, as depriving the companies of their property
without due process of law, and as depriving them of the equal
protection of the laws."
In
Covington & Lexington Turnpike Road Co. v.
Sandford, 164 U. S. 578,
164 U. S. 584,
164 U. S.
594-595,
164 U. S. 597,
which involved the validity of a state enactment prescribing rates
of toll on a turnpike road, the court said:
"A statute which, by its necessary operation, compels a turnpike
company, when charging only such tolls as are just to the public,
to submit to such further reduction of rates as will prevent it
from keeping its road in proper repair and from earning any
dividends whatever for stockholders is as obnoxious to the
Constitution of the United States as would be a similar statute
relating to the business of a railroad corporation having
authority, under its charter, to collect and receive tolls for
passengers and freight."
And in
Chicago, Burlington &
Quincy Railroad v. Chicago,
Page 169 U. S. 526
166 U. S. 226,
166 U. S. 241,
it was held that
"a judgment of a state court, even if it be authorized by
statute, whereby private property is taken for the state or under
its direction for public use, without compensation made or secured
to the owner, is upon principle and authority wanting in the due
process of law required by the Fourteenth Amendment of the
Constitution of the United States, and the affirmance of such
judgment by the highest court of the state is a denial by that
State of a right secured to the owner by that instrument."
In view of the adjudications, these principles must be regarded
as settled:
1. A railroad corporation is a person within the meaning of the
Fourteenth Amendment declaring that no state shall deprive any
person of property without due process of law, nor deny to any
person within its jurisdiction the equal protection of the
laws.
2. A state enactment, or regulations made under the authority of
a state enactment, establishing rates for the transportation of
persons or property by railroad that will not admit of the carrier
earning such compensation as, under all the circumstances, is just
to it and to the public would deprive such carrier of its property
without due process of law and deny to it the equal protection of
the laws, and would therefore be repugnant to the Fourteenth
Amendment of the Constitution of the United States.
3. While rates for the transportation of persons and property
within the limits of a state are primarily for its determination,
the question whether they are so unreasonably low as to deprive the
carrier of its property without such compensation as the
Constitution secures, and therefore without due process of law,
cannot be so conclusively determined by the legislature of the
state, or by regulations adopted under its authority, that the
matter may not become the subject of judicial inquiry.
The cases before us directly present the important question last
stated.
Before entering upon its examination, it may be observed that
the grant to the legislature in the Constitution of Nebraska
Page 169 U. S. 527
of the power to establish maximum rates for the transportation
of passengers and freight on railroads in that state has reference
to "reasonable" maximum rates. These words strongly imply that it
was not intended to give a power to fix maximum rates without
regard to their reasonableness. Be this as it may, it cannot be
admitted that the power granted may be exerted in derogation of
rights secured by the Constitution of the United States, or that
the judiciary may not, when its jurisdiction is properly invoked,
protect those rights.
What are the considerations to which weight must be given when
we seek to ascertain the compensation that a railroad company is
entitled to receive, and a prohibition upon the receiving of which
may be fairly deemed a deprivation by legislative decree of
property without due process of law? Undoubtedly that question
could be more easily determined by a commission composed of persons
whose special skill, observation, and experience qualifies them to
so handle great problems of transportation as to do justice both to
the public and to those whose money has been used to construct and
maintain highways for the convenience and benefit of the people.
But despite the difficulties that confessedly attend the proper
solution of such questions, the Court cannot shrink from the duty
to determine whether it be true, as alleged, that the Nebraska
statute invades or destroys rights secured by the supreme law of
the land. No one, we take it, will contend that a state enactment
is in harmony with that law simply because the legislature of the
state has declared such to be the case, for that would make the
state legislature the final judge of the validity of its enactment,
although the Constitution of the United States and the laws made in
pursuance thereof are the supreme law of the land, anything in the
constitution or laws of any state to the contrary notwithstanding.
Art. VI. The idea that any legislature, state or federal, can
conclusively determine for the people and for the courts that what
it enacts in the form of law, or what it authorizes its agents to
do, is consistent with the fundamental law, is in opposition to the
theory of our institutions. The duty rests upon all courts, federal
and state, when their
Page 169 U. S. 528
jurisdiction is properly invoked, to see to it that no right
secured by the supreme law of the land is impaired or destroyed by
legislation. This function and duty of the judiciary distinguishes
the American system from all other systems of government. The
perpetuity of our institutions, and the liberty which is enjoyed
under them, depend in no small degree upon the power given the
judiciary to declare null and void all legislation that is clearly
repugnant to the supreme law of the land.
We turn now to the evidence in the voluminous record before us
for the purpose of ascertaining whether -- looking at the cases in
the light of the facts as they existed when the decrees were
rendered -- the Nebraska statute, if enforced, would by its
necessary operation have deprived the companies whose stockholders
and bondholders here complain of the right to obtain just
compensation for the services rendered by them.
The first and most important contention of the plaintiffs is
that if the statute had been in force during any one of the three
years preceding its passage, the defendant companies would have
been compelled to use their property for the public substantially
without reward, or without the just compensation to which it was
entitled. We think this mode of calculation for ascertaining the
probable effect of the Nebraska statute upon the railroad companies
in question is one that may be properly used.
The conclusion reached by the circuit court was that the
reduction made by the Nebraska statute in the rates for local
freight was so unjust and unreasonable as to require a decree
staying the enforcement of such rates against the companies named
in the bill.
Ames v. Union Pacific Railway, 64 F. 165,
189. That conclusion was based largely upon the figures presented
by Mr. Dilworth while he was a secretary of the State Board of
Transportation, as well as a defendant and one of the solicitors of
the defendants in these causes. He was a principal witness for that
Board. His general fairness and his competency to speak of the
facts upon which the question before us depends are apparent on the
record. He stated that the average reduction made by the statute on
all the "commodities of local rates" was 29.50 percent, and
this
Page 169 U. S. 529
estimate seems to have been accepted by the parties as correct.
He estimated that the percentage of operating expenses on local
business would exceed the percentage of operating expenses on all
business by at least ten percent, and that it might go as high as
twenty percent, or higher. And this view is more than sustained by
the evidence of witnesses possessing special knowledge of railroad
transportation and of the cost of doing local business as compared
with what is called "through business." Indeed one of those
witnesses states that the cost of carrying local freight is four
times as much as the cost of through freight per ton per mile;
another that the cost of the short haul is "reasonably double the
long haul." If due regard be had to the testimony -- and we have no
other basis for our judgment -- we are not permitted to place the
extra cost of local business at less than ten percent greater than
the percentage of the cost of all business.
In answer to questions propounded to him by the defendants
constituting the State Board of Transportation, Mr. Dilworth stated
that he had prepared himself with an estimate showing the number of
tons of freight commonly spoken of as "local freight" hauled on the
respective railways in Nebraska, and the amount received by the
railway companies by way of tariff on tons of freight hauled,
including through as well as local freight, and was qualified to
speak as to the amount received by the companies for both
passengers and freight within the state, and the reduction that
would take place in rates under the statute in question. He
presented various tables showing the results of his investigations.
One is known as "Exhibit 4," and is an "estimate of local business,
and the effect of House Roll 33" on the Burlington, St. Paul,
Fremont, Union Pacific, Omaha, St. Joseph, and Kansas City
Companies for the year 1892. Another is called "Exhibit 19," and is
a like estimate in respect of the same companies for the years 1891
and 1893. Another is known as "Exhibit 20," and shows "Tons
carried, tonnage per mile, and percentage of expenses for the years
ending June 30, 1891, 1892, and 1893 (Nebraska)." These exhibits
are as follows:
Page 169 U. S. 530
|
169
U.S. 466exh4|
image:a
Page 169 U. S. 531
|
169
U.S. 466exh19|
image:b
Page 169 U. S. 532
|
169
U.S. 466exh20|
image:c
Page 169 U. S. 533
It may be here stated that the words in these exhibits, "number
of tons hauled locally," refer to freight that started and ended in
the state. The words in
169
U.S. 466exh4|>Exhibit 4, "amount received for freight hauled
in Nebraska, including through and local," and the like words in
Exhibit 19 refer not only to freight starting and ending in the
state, but to all freight hauled by the railroad company in
Nebraska, regardless of its destination or origin -- that is,
"freight that begins in the state and goes out of the state,
freight that begins out of the state and comes into the state, and
freight which begins and ends in the state."
The words "percent of reduction on all the business done in the
state by House Roll 33" in Exhibits
169
U.S. 466exh4|>4 and
169
U.S. 466exh19|>19 mean the percentage of the total amount of
all business, passenger and freight, done in the state, whatever
its origin or destination, and do not indicate the percentage of
reduction on local business when considered alone. It should be
stated also that the words, "percentage of expenses to earnings" in
169
U.S. 466exh20|>Exhibit 20 refer to all business, through and
local, done by the railroad company within the state. Mr. Dilworth,
as we have seen, testified that, if the local business alone were
considered, the percentage of expenses to earnings upon such
business would be at least ten percent more than the general
percentage of expenses to earning on all business, both through and
local. It is important here to note that his estimates are of
business from July first to the succeeding June 30th. So that, when
allusion is made presently to his estimates for 1891, 1892, and
1893, it will be understood to refer to the years ending the 30th
days of June 1891, 1892, and 1893, respectively.
From July 1, 1890, to June 30, 1891, as shown by
169
U.S. 466exh20|>Exhibit 20, the percentage of expenses to
earnings on all business on the Burlington road was 66.24; on the
St. Paul road 70.78, on the Fremont road 49.87, on the Union
Pacific road 68.94, on the Omaha road 120.26, on the St. Joseph
road 96.44, and on the Kansas City road 9 .54;
From July 1, 1891, to June 30, 1892, as shown by the same
exhibit, the percentage of expenses to earnings on all business on
the Burlington road was 64.23, on the St. Paul
Page 169 U. S. 534
road 65.96, on the Fremont road 70.71, on the Union Pacific road
56.44, on the Omaha road 93.12, on the St. Joseph road 74.23, and
on the Kansas City road 75.19; and
From July 1, 1892, to June 30, 1893, as shown by the same
exhibit, the percentage of expenses to earnings on all business on
the Burlington road was 65.51, on the St. Paul road 64.58, on the
Fremont road 53.66, on the Union Pacific road 58.51, on the Omaha
road 94.14, on the St. Joseph road 62.05, and on the Kansas City
road 76.50.
In view of the reduction of 29.50 in rates prescribed by the
statute and of the extra cost of doing local business, as compared
with other business, what do these facts show?
Take the case of the Burlington road from July 1, 1890, to June
30, 1891. Looking at the entire business done on it during that
period within the limits of the state, we find that the percentage
of operating expenses to earnings on all business -- which, as
stated, does not include the extra cost of local business -- was
66.24. Add to this the extra cost of local business, estimated at
least ten percent, and the result is that, under the rates charged
during the period stated, the cost to the Burlington Company of
earning $100 would have been $76.24. Now if the reduction of 29 1/2
percent made by the act of 1893 had been in force prior to July 1,
1891, the company would have received $70.50 as against one hundred
dollars for the same service, showing that in that year the
operating expenses would have exceeded the earnings by $5.74 in
every $100 of the amount actually received by it.
By like calculations, it will appear that each of the railroad
companies would have conducted their local business at a loss
during the periods stated, except that in the year ending June 30,
1891, and in the year ending June 30, 1893, the earnings of the
Fremont Company, and in the years ending the 30th days of June 1892
and 1893, respectively, the earnings of the Union Pacific Company
would have slightly exceeded their operating expenses.
Under the rates prescribed by the act of 1893 the cost to the
respective companies of local business in Nebraska would have
exceeded the earnings for the years ending June 30,
Page 169 U. S. 535
1891, 1892, and 1893, respectively, in every $100 of the amount
actually received, as follows: to the Burlington Company, by $5.74,
$3.73, and $5.01; to the St. Paul Company, by $10.28, $5.46, and
$4.08; to the Omaha Company, $59.76, $32.62, and $33.64; to the St.
Joseph Company, by $35.94, $13.73, and $1.55, and to the Kansas
City Company, by $39.04, $14.69, and $16. The cost to the Union
Pacific Company for the year ending June 30, 1891, of its local
business, under the rates prescribed by the statute of 1893, would
have caused a loss of $8.44 in every one hundred dollars of the
amount actually received.
In order to show these results at a glance the following table
is inserted upon the basis of one hundred as representing the
amounts actually charged and received by the respective railroad
companies for the years given.
image:d
There are other views of the case suggested by the above
exhibits and table, which show the same results.
In the year ending June 30, 1891, under the rates then in force,
the Burlington Company received $1,066,871 for tons carried
locally. If the business had been done under the rates prescribed
by the act of 1893, it would have received 29 1/2 percent less --
that is, only $752,145, or $314,726 less than it did receive. The
percentage of expenses to earnings, including the extra cost of
local business, was 76.24 -- that is, it cost $813,382 to earn
$1,066,871. So that the difference between $813,382 and $752,145
shows that if the rates prescribed by the statute of 1893 had been
in force during the year ending June 30, 1891, the amount received
would have been less than the operating expenses of the Burlington
Company by $61,237.
During the year ending June 30, 1892, the same company received
for tons carried locally $1,237,884. If the act of 1893 had been in
force, it would have received, because of the reduced rates
prescribed by that act, only $872,709 -- less by $365,175 than it
did receive. The percentage of expenses to earnings, including the
extra cost of local business, was 74.23 -- that is, the $872,709
would have been earned at a cost of $918,881. So that, under the
rates prescribed by the act
Page 169 U. S. 536
of 1893, the loss during the period named would have been
$46,172.
During the year ending June 30, 1893, that company received
$1,242,416 for tons carried locally, whereas under the 29 1/2
percent reduction prescribed by the statute of that year, it would
have received only $875,905 -- that is, less by $366,512 than it
did receive. The percentage of its expenses to earnings in that
year, including the extra cost of local business, was 75.51 -- that
is, under the statutory rates $875,905, would have been earned at a
cost of $938,147, which would have been a loss of $62,243.
Page 169 U. S. 537
By the same mode of calculation, it will be found that, if the
statute of 1893 had been enforced during the years ending the 30th
days of June, 1891, 1892, and 1893, respectively, the other
companies would have lost -- that is, their expenses would have
exceeded their earnings -- during those years by the following
amounts: The St. Paul Company, $11,403, $6,716, and $5,814; the
Fremont Company, $34,377 for the year ending June 30, 1892; the
Union Pacific Company, $23,480 for the year ending June 30, 1891;
the Omaha Company, $45, 166, $28,813, and $27,085; the St. Joseph
Company, $7,840, $4,256, and $523, and the Kansas City Company,
$2,627, $974, and $1,510; while the earnings of the Union Pacific
Company would have exceeded its expenses for the years ending the
30th days of June, 1892 and 1893, respectively, by $16, 170 and
$8,234, and those of the Fremont Company by $37,037 and $29,036 for
the years ending the 30th days of June, 1891 and 1893,
respectively.
These results will be seen in the following table, based upon
the above exhibits, and assuming that ten percent was the very
lowest amount of the extra cost of business beginning and ending in
the state:
image:e
Counsel for the appellants contend that the railroad companies
in Nebraska derived a profit from their local tonnage of nearly 100
percent over and above operating expenses. This contention is based
upon the evidence given by William Randall, freight and ticket
agent as well as auditor of the Burlington road in Nebraska, on his
first examination as a witness. He then stated that the earnings of
the company for the year 1892 -- meaning for the year beginning
January 1, 1892 -- upon freight starting and ending within the
state were $1,853,036.59, and that the operating expenses,
including taxes, on that business were $972,183.70. These figures,
counsel say, show that
"there was a clear profit, over operating expenses, including
taxes, of nearly one hundred percent on the local business of the
Burlington Company in 1892."
But counsel overlook the fact that, upon his second examination,
Mr. Randall stated that his first figures were not correct, and
that the operating expenses on local business in 1892 were
Page 169 U. S. 539
$1,221,742.84, and not $972,183.70. This agrees with the figures
given by Mr. Taylor, another auditor of the Burlington Company. Now
if the act of 1893 had been in force during 1892, the earnings in
the latter year, $1,853,036.59, would have been reduced by 29 1/2
percent -- that is, by $546,645.79 -- leaving $1,306,390.80 as the
total receipts on local business, which, after deducting operating
expenses, $1,221,742.84, would leave a profit of $84,567.97. If, as
counsel for appellees contend, ten percent be added as the extra
cost of local business, the result would show an actual loss on
that business during the whole of 1892. But if that mode of
calculation be not adopted, the utmost that can be said to be
established by the evidence of Taylor and Randall would be that if
the rates fixed by the act of 1893 had been in force during 1892,
the company would have received on local business, in the latter
year, $84,647.96 over and above operating expenses, or a little
over six percent of the amount of those expenses. The difference
between the figures of Dilworth and Taylor and Randall as to the
earnings of the Burlington Company arises, so far as we can
perceive, from the fact that their calculations cover different
periods. Dilworth gave the earnings from July 1, 1891, to June 30,
1892, and speaks of them as the earnings for 1892, while Taylor and
Randall gave the earnings from January 1, 1892, to December 31,
1892. There may have been an unusual amount of business during the
last six months of 1892 embraced in the estimates of Taylor and
Randall, and not embraced by Dilworth's estimates. We cannot,
therefore, say that the testimony of Taylor and Randall overthrows
the estimates of Dilworth.
It is said by the appellants that the local rates established by
the Nebraska statute are much higher than in the State of Iowa, and
that fact shows that the Nebraska rates are reasonable. This
contention was thus met by the circuit court:
"It is, however, urged by the defendants that in the general
tariffs of these companies there is an inequality, that the rates
in Nebraska are higher than those in adjoining states, and that the
reduction by House Roll 33 simply establishes an equality between
Nebraska and the other states through
Page 169 U. S. 540
which the roads run. The question is asked, are not the people
of Nebraska entitled to as cheap rates as the people of Iowa? Of
course, relatively, they are. That is, the roads may not
discriminate against the people of any one state, but they are not
necessarily bound to give absolutely the same rates to the people
of all the states, for the kind and amount of business and the cost
thereof are factors which determine largely the question of rates,
and these vary in the several states. The volume of business in one
state may be greater per mile, while the cost of construction and
of maintenance is less; hence to enforce the same rates in both
states might result in great injustice in one, while it would only
be reasonable and fair in another. Comparisons, therefore, between
the rates of two states are of little value unless all the elements
that enter into the problem are presented. It may be true, as
testified by some of the witnesses, that the existing local rates
in Nebraska are forty percent higher than similar rates in the
State of Iowa. But it is also true that the mileage earnings in
Iowa are greater than in Nebraska. In Iowa there are 230 people to
each mile of railroad, while in Nebraska there are but 190, and, as
a general rule, the more people there are, the more business there
is. Hence a mere difference between the rates in two states is of
comparatively little significance."
64 F. 165. In these views we concur, and it is unnecessary to
add anything to what was said by the circuit court on this
point.
It is further said in behalf of the appellants that the
reasonableness of the rates established by the Nebraska statute is
not to be determined by the inquiry whether such rates would leave
a reasonable net profit from the local business affected thereby,
but that the court should take into consideration, among other
things, the whole business of the company -- that is, all its
business, passenger and freight, interstate and domestic. If it be
found upon investigation that the profits derived by a railroad
company from its interstate business alone are sufficient to cover
operating expenses on its entire line, and also to meet interest,
and justify a liberal dividend upon its stock, may the legislature
prescribe rates for domestic
Page 169 U. S. 541
business that would bring no reward, and be less than the
services rendered are reasonably worth? Or must the rates for such
transportation as begins and ends in the state be established with
reference solely to the amount of business done by the carrier
wholly within such state, to the cost of doing such local business,
and to the fair value of the property used in conducting it,
without taking into consideration the amount and cost of its
interstate business, and the value of the property employed in it?
If we do not misapprehend counsel, their argument leads to the
conclusion that the State of Nebraska could legally require local
freight business to be conducted even at an actual loss if the
company earned on its interstate business enough to give it just
compensation in respect of its entire line and all its business,
interstate and domestic. We cannot concur in this view. In our
judgment, it must be held that the reasonableness or
unreasonableness of rates prescribed by a state for the
transportation of persons and property wholly within its limits
must be determined without reference to the interstate business
done by the carrier or to the profits derived from it. The state
cannot justify unreasonably low rates for domestic transportation,
considered alone, upon the ground that the carrier is earning large
profits on its interstate business, over which, so far as rates are
concerned, the state has no control. Nor can the carrier justify
unreasonably high rates on domestic business upon the ground that
it will be able only in that way to meet losses on its interstate
business. So far as rates of transportation are concerned, domestic
business should not be made to bear the losses on interstate
business, nor the latter the losses on domestic business. It is
only rates for the transportation of persons and property between
points within the state that the state can prescribe, and when it
undertakes to prescribe rates not to exceeded by the carrier, it
must do so with reference exclusively to what is just and
reasonable, as between the carrier and the public, in respect of
domestic business. The argument that a railroad line is an entirety
-- that its income goes into, and its expenses are provided for,
out of a common fund, and that its capitalization is on its entire
line, within and without
Page 169 U. S. 542
the state -- can have no application where the state is without
authority over rates on the entire line, and can only deal with
local rates and make such regulations as are necessary to give just
compensation on local business.
Touching the suggestion that the reduction on rates made by the
state law was reasonable if regard be had to all the business,
through and local, done in the state by the railroad companies, the
circuit court said:
"But again, as Mr. Dilworth testified, the average reduction on
local rates caused by House Roll 33 is 29 1/2 percent. The tariff
which was in force at the time of the passage of this act had been,
for some three or more years, fixed by the voluntary action of the
railroad companies, and the reduction of 29 1/2 percent was from
their rates. It must be remembered that these roads are competing
roads; that competition tends to a reduction of rates -- sometimes,
as the history of the country has shown, below that which affords
any remuneration to those who own the property. Can it be possible
that any business so carried on can suffer a reduction of 29 1/2
percent in its receipts without ruin? What would any businessman,
engaged in any business of a private character, think of a
compulsory reduction of his receipts to the amount of 29 1/2
percent? The effect of this testimony is not destroyed by the table
offered of the percentage of reduction on the total amount of
business done by these companies in the state, as follows:"
B. and M.R. . . . . . . . . 4.2 percent
C., St.P., M. and O. . . . . 4.5 percent
F., E. and M.B. . . . . . . 4.1 percent
Union Pacific . . . . . . . 2.0 percent
O. and R.V. . . . . . . . . 1.9 percent
St.J. and G.I. . . . . . . . 2.7 percent
K.C. and O. . . . . . . . . 1.5 percent
"For such a table only indicates, as is further shown by
defendants' Exhibit 4, how small a proportion of the the total
amount of business done in the state comes from purely local
freight. Nor is it weakened by any comparison between the amount of
reduction and the total receipts from all business.
Page 169 U. S. 543
It may be, as stated by counsel, that the annual earnings of the
Chicago, Burlington and Quincy Company are $27,916,128, and that
the total amount of reduction caused by this House Roll 33 is only
$365,175. It may be that the capital stock of the company is
$76,407,500, and that $365,175 distributed among the stockholders
may not be for any of them a great sum, but the entire earnings of
the C., B. & Q. are more than twenty times the receipts from
local freight in Nebraska, and to reduce such earnings by twenty
times $365,175 would make a startling difference in their amount.
The fact that the State of Nebraska can reach only one-twentieth of
the total earnings gives it no greater right to make a reduction in
respect to that one-twentieth than it would have had it the power
over the total earnings, and attempted in them a like percent of
reduction. If it would be unreasonable to reduce the total earnings
of these roads 29 1/2 percent, it is at least
prima facie
equally unreasonable to so reduce any single fractional part of
such earnings."
It appears from what has been said that if the rates prescribed
by the act of 1893 had been in force during the years ending June
30, 1891, 1892, and 1893, the Fremont Company, in the years ending
June 30, 1891, and June 30, 1893, and the Union Pacific company in
the years ending June 30, 1892, and June 30, 1893, would each have
received more than enough to pay operating expenses. Do those facts
affect the general conclusion as to the probable effect of the act
of 1893? In the discussion of this question, the plaintiffs
contended that a railroad company is entitled to exact such charges
for transportation as will enable it at all times not only to pay
operating expenses, but also to meet the interest regularly
accruing upon all its outstanding obligations and justify a
dividend upon all its stock, and that to prohibit it from
maintaining rates or charges for transportation adequate to all
those ends will deprive it of its property without due process of
law, and deny to it the equal protection of the laws. This
contention was the subject of elaborate discussion, and, as it
bears upon each case in its important aspects, it should not be
passed without examination.
Page 169 U. S. 544
In our opinion, the broad proposition advanced by counsel
involves some misconception of the relations between the public and
a railroad corporation. It is unsound in that it practically
excludes from consideration the fair value of the property used,
omits altogether any consideration of the right of the public to be
exempt from unreasonable exactions, and makes the interests of the
corporation maintaining a public highway the sole test in
determining whether the rates established by or for it are such as
may be rightfully prescribed as between it and the public. A
railroad is a public highway, and nonetheless so because
constructed and maintained through the agency of a corporation
deriving its existence and powers from the state. Such a
corporation was created for public purposes. It performs a function
of the state. Its authority to exercise the right of eminent domain
and to charge tolls was given primarily for the benefit of the
public. It is under governmental control, though such control must
be exercised with due regard to the guaranties for the protection
of its property.
Olcott v.
Supervisors, 16 Wall. 678,
83 U. S. 694;
Sinking Fund Cases, 99 U. S. 700,
99 U. S. 719;
Cherokee Nation v. Southern Kansas Railway, 135 U.
S. 641,
135 U. S. 657.
It cannot, therefore, be admitted that a railroad corporation
maintaining a highway under the authority of the state may fix its
rates with a view solely to its own interests, and ignore the
rights of the public. But the rights of the public would be ignored
if rates for the transportation of persons or property on a
railroad are exacted without reference to the fair value of the
property used for the public, or the fair value of the services
rendered, but, in order simply that the corporation may meet
operating expenses, pay the interest on its obligations, and
declare a dividend to stockholders.
If a railroad corporation has bonded its property for an amount
that exceeds its fair value, or if its capitalization is largely
fictitious, it may not impose upon the public the burden of such
increased rates as may be required for the purpose of realizing
profits upon such excessive valuation or fictitious capitalization,
and the apparent value of the property and franchises used by the
corporation, as represented by its
Page 169 U. S. 545
stocks, bonds, and obligations, is not alone to be considered
when determining the rates that may be reasonably charged. What was
said in
Covington & Lexington Turnpike Road Co. v.
Sandford, 164 U. S. 578,
164 U. S.
596-597, is pertinent to the question under
consideration. It was there observed:
"It cannot be said that a corporation is entitled, as of right
and without reference to the interests of the public, to realize a
given percent upon its capital stock. When the question arises
whether the legislature has exceeded its constitutional power in
prescribing rates to be charged by a corporation controlling a
public highway, stockholders are not the only persons whose rights
or interests are to be considered. The rights of the public are not
to be ignored. It is alleged here that the rates prescribed are
unreasonable and unjust to the company and its stockholders. But
that involves an inquiry as to what is reasonable and just for the
public. . . . The public cannot properly be subjected to
unreasonable rates in order simply that stockholders may earn
dividends. The legislature has the authority in every case, where
its power has not been restrained by contract, to proceed upon the
ground that the public may not rightfully be required to submit to
unreasonable exactions for the use of a public highway established
and maintained under legislative authority. If a corporation cannot
maintain such a highway and earn dividends for stockholders, it is
a misfortune for it and them which the Constitution does not
require to be remedied by imposing unjust burdens upon the public.
So that the right of the public to use the defendant's turnpike
upon payment of such tolls as, in view of the nature and value of
the services rendered by the company, are reasonable is an element
in the general inquiry whether the rates established by law are
unjust and unreasonable."
A corporation maintaining a public highway, although it owns the
property it employs for accomplishing public objects, must be held
to have accepted its rights, privileges, and franchises subject to
the condition that the government creating it, or the government
within whose limits it conducts its business may, by legislation,
protect the people against unreasonable
Page 169 U. S. 546
charges for the services rendered by it. It cannot be assumed
that any railroad corporation accepting franchises, rights, and
privileges at the hands of the public ever supposed that it
acquired, or that it was intended to grant to it, the power to
construct and maintain a public highway simply for its benefit,
without regard to the rights of the public. But it is equally true
that the corporation performing such public services, and the
people financially interested in its business and affairs have
rights that may not be invaded by legislative enactment in
disregard of the fundamental guaranties for the protection of
property. The corporation may not be required to use its property
for the benefit of the public without receiving just compensation
for the services rendered by it. How such compensation may be
ascertained, and what are the necessary elements in such an
inquiry, will always be an embarrassing question. As said in the
case last cited:
"Each case must depend upon its special facts, and when a court,
without assuming itself to prescribe rates, is required to
determine whether the rates prescribed by the legislature for a
corporation controlling a public highway are, as an entirety, so
unjust as to destroy the value of its property for all the purposes
for which it was acquired, its duty is to take into consideration
the interest both of the public and of the owner of the property,
together with all other circumstances that are fairly to be
considered in determining whether the legislature has, under the
guise of regulating rates, exceeded its constitutional authority
and practically deprived the owner of property without due process
of law. . . . The utmost that any corporation operating a public
highway can rightfully demand at the hands of the legislature when
exerting its general powers is that it receive what, under all the
circumstances, is such compensation for the use of its property as
will be just both to it and to the public."
We hold, however, that the basis of all calculations as to the
reasonableness of rates to be charged by a corporation maintaining
a highway under legislative sanction must be the fair value of the
property being used by it for the convenience of the public. And in
order to ascertain that value, the
Page 169 U. S. 547
original cost of construction, the amount expended in permanent
improvements, the amount and market value of its bonds and stock,
the present as compared with the original cost of construction, the
probable earning capacity of the property under particular rates
prescribed by statute, and the sum required to meet operating
expenses are all matters for consideration, and are to be given
such weight as may be just and right in each case. We do not say
that there may not be other matters to be regarded in estimating
the value of the property. What the company is entitled to ask is a
fair return upon the value of that which it employs for the public
convenience. On the other hand, what the public is entitled to
demand is that no more be exacted from it for the use of a public
highway than the services rendered by it are reasonably worth. But
even upon this basis, and determining the probable effect of the
act of 1893 by ascertaining what could have been its effect if it
had been in operation during the three years immediately preceding
its passage, we perceive no ground on the record for reversing the
decree of the circuit court. On the contrary, we are of opinion
that, as to most of the companies in question, there would have
been, under such rates as were established by the act of 1893, an
actual loss in each of the years ending June 30, 1891, 1892, and
1893, and that, in the exceptional cases above stated, when two of
the companies would have earned something above operating expenses
in particular years, the receipts or gains, above operating
expenses, would have been too small to affect the general
conclusion that the act, if enforced, would have deprived each of
the railroad companies involved in these suits of the just
compensation secured to them by the Constitution. Under the
evidence, there is no ground for saying that the operating expenses
of any of the companies were greater than necessary.
In concluding this opinion, it may not be inappropriate to say
that the conclusions reached by us as to the effect of the Nebraska
statute find some support in the report of the Board of Secretaries
of the Nebraska Board of Transportation made in September, 1891, to
the Board itself, and signed by Mr. Dilworth
Page 169 U. S. 548
and his colleagues. That report was made pursuant to a
resolution of the Board requiring the Secretaries to prepare a
statement of facts in reference to the rates of transportation in
Nebraska. It contains a brief history of what it characterizes as
"the controversy on the question of freight rates between the
people and the railroads of the state," and embodies such facts,
figures, and arguments as the Secretaries gathered from both sides.
The report says:
"The present controversy between the people and the railroads of
this state originally grew our of the question not of rates or
reduction of rates, but of control. The people, recognizing the
railroads as common carriers, not entitled, under the state
constitution, to the same broad liberty of action in business that
the individual citizen has, wanted to control the roads. The roads,
impatient of interference, wanted to control themselves, and manage
their business in their own way."
It further states:
"We have given you in the foregoing a brief history of the rate
matter as we have found it, and from that history, and from the
evidence and reports on file in our office, we beg leave to submit
in conclusion the following findings of fact: First. We find from
the evidence and sworn statements and reports on file in our
office, and from personal inspection, that the railroads in this
state could not be duplicated for a less sum than $30,000 per mile,
taking into consideration their equipments and depot and terminal
facilities."
Here follow a mass of figures and calculations, and the report
concludes:
"We further find that the railroads are not in a condition to
stand, nor do their earnings, figured on a basis cost of $30,000
per mile, and not what they claim they cost, justify any cut in
local rates of this state at the present time, and further, that a
reduction in the local rates in this state would increase the
through rates to market for our grain, and would be a blow at the
industry of the state. This last finding is fully established by
the fact that the Board of Transportation reduced the local rates
on hard coal 60 percent, and yet the price to the consumer was not
lowered, nor the price at the mines raised, which shows
conclusively that the through rates must have been raised. In
submitting this report, we have presented the facts
Page 169 U. S. 549
and figures as we find them from evidence obtainable from sworn
reports now on file in our office. And we would respectfully
recommend that no action be taken that will in any way jeopardize
the interests of the producers of Nebraska, but that all interests
be protected in the fullest manner possible, as provided by the
foregoing findings."
To this report of the Secretaries is appended the "Findings of
the Board," from which we make this extract:
"After a careful and quite thorough investigation of the
question of freight rates in Nebraska, which has occupied much time
and has taken a wide range, the State Board of Transportation has
arrived at the conclusion that the rates now in force in this state
cannot be generally reduced without doing violence to the business
interests of the state and at the same time injuring the shipping
and producing classes. We have come to this conclusion not by
taking the cost of construction and equipments, nor the amount of
stock and bonds issued per mile, but by making our computations
upon the basis of what it would cost to duplicate the property at
the present time. It has been our endeavor to deal fairly and
justly with the question, and in arriving at a conclusion, we have
been governed only by the evidence, statements, and facts produced
for our consideration. A candid examination and comparison of the
figures presented to us in the unanimous report of the Board of
Secretaries, in the opinion of this Board, fully justifies the
conclusion reached that a general reduction of rates, as now in
force over the state, is not practical at this time."
So that we have the judgment of the State Board of
Transportation, as constituted in 1891, that a general reduction of
rates could not then have been made without injury to the business
of the state, to say nothing of the interests of those whose means
were invested in railroad property. We are unable to find from the
record before us that the situation in Nebraska had so changed in
1893 as to justify that being done in that year which it was not
safe or just to do in 1891.
But it may be added that the conditions of business, so far as
railroad corporations are concerned, have probably changed
Page 169 U. S. 550
for the better since the decree below, and that the rates
prescribed by the statute of 1893 may now afford all the
compensation to which the railroad companies in Nebraska are
entitled as between them and the public. In anticipation, perhaps,
of such a change of circumstances and the exceptional character of
the litigation, the circuit court wisely provided in its final
decree that the defendant members of the Board of Transportation
might,
"when the circumstances have changed so that the rates fixed in
the said act of 1893 shall yield to the said companies reasonable
compensation for the services aforesaid,"
apply to the court, by bill or otherwise, as they might be
advised, for a further order in that behalf. Of this provision of
the final decree the State Board of Transportation, if so advised,
can avail itself. In that event, if the circuit court finds that
the present condition of business is such as to admit of the
application of the statute to the railroad companies in question
without depriving them of just compensation, it will be its duty to
discharge the injunction heretofore granted and to make whatever
order is necessary to remove any obstruction placed by the decrees
in these cases in the way of the enforcement of the statute.
Perceiving no error on the record in the light of the facts
presented to the circuit court,
The decree in each case must be affirmed.
