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Argument for Appellee.
ment. The constitutional limitation is that the rates thus fixed, although they are prima facie valid, because presumptively reasonable, are nevertheless void if the carrier affected thereby can establish in a proper judicial proceeding that they are unreasonable. The question of reasonableness or unreasonableness is in all cases "ultimately a judicial question, requiring due process of law for its determination"— that is, judicial investigation in a suit in the courts of justice "under the forms and with the machinery provided by the wisdom of successive ages for the investigation judicially of the truth of a matter in controversy." It is not competent, therefore, for the State to enact that the rates fixed by a commission, whether ex parte or after notice and investigation are conclusive or final, for such an act would be unconstitutional, since it denies to the company due process of law, and, by depriving it of the lawful use of its property deprives it of the property itself, and of the equal protection of the laws. Chicago, Milwaukee &c. Railway v. Minnesota, 134 U. S. 418, 458. As the result of all this we contend (a) that the provisions of the Texas Railroad Commission act as to fixing and enforcing rates are unconstitutional; and (b) that the complainants are entitled, on the averments in the bill and the amended bill, to an injunction and decree against the enforcement of those rates.
The justice of this contention will be shown by an examination of the decisions of this court on the subject of the extent of legislative power over railway tariffs.
The earliest decisions were in Munn v. Illinois, and what are known as the Granger cases. These cases were decided in 1876, and are reported in 94 U. S. 113; 155-180.
In each of the cases the state legislatures had fixed a maximum rate. The elevator owner and the railway companies denied the existence of any such power in the States. This was the great overshadowing question, and the one to which the attention of the court was given, and the one which was adjudged. The judgment was that such a power existed, but the scope and extent of the power were not determined, for the cases did not require it.
Argument for Appellee.
In 1883, the general question of the scope of state legislative power, under special provisions of the state constitution and statutes, to fix rates for a public water supply came before the court in a case from California.
The case of Spring Valley Water Works v. Schottler, 110 U. S. 347 (1883), above referred to, was this:
The Spring Valley Water Works Company was incorporated under the General Incorporation act of the State of California, and under a constitution which provided that all laws passed might be from time to time altered and repealed. The act under which the company was incorporated provided that rates for water should be fixed by a board of commissioners to be appointed in part by the corporation and in part by the municipal authorities. Afterwards the constitution and laws were changed so as to take away from the corporations which had been organized and put into operation under the old constitution and laws, the power to name members of the boards of commissioners, and so as to place in the municipal authorities the sole power of fixing rates for water. The precise and sole point decided was that these changes did not violate any provisions of the Constitution of the United States. There was no question in the record as to the reasonableness of rates fixed for water. This is most material.
The next case in the order of time bearing upon the subject is the Wabash Railway case, entitled Wabash, St. Louis & Pacific Railway v. Illinois, 118 U. S. 557 (1886).
In this case the Wabash Railway Company charged Elder & McKinney for transporting a carload of goods from Peoria, Illinois, to New York City, $39, being at the rate of 15 cents per hundred pounds for said carload. On the same day the said company charged Bailey & Swannell on another carload of goods from Gilman, Illinois, to New York City, $65, being at the rate of 25 cents per hundred pounds, though the carload transported for Elder & McKinney was carried 86 miles further in the State of Illinois than the other. The Supreme Court of Illinois held that this was an unjust discrimination, and violated the Illinois statute which prohibited unjust discriminations. The Supreme Court of the United States
Argument for Appellee.
reversed this judgment, and held that these shipments were commerce among the States, the regulation of which is confided exclusively to Congress, and that such transportation was not in any degree or to any extent subject to regulation by the State; and that the statute of Illinois as applied to any part of such shipments even the part of the distance within the State of Illinois - was forbidden by the Constitution of the United States. In the next year there came before the court the Arkansas case of Dow v. Beidelman, 125 U. S. 680 (1887). Here it appeared that the Memphis and Little Rock Railroad Company had been recently reorganized, and there was no proof of the amount of the capital invested in the reorganized company, or the amount of its capital stock, or the price paid by such reorganized company for the road. The State passed an act fixing in the act itself three cents a mile as the maximum fare for carrying passengers. There was no proof in the case that this was an unreasonable rate, and the court decided that it could not presume it to be unreasonable, and affirmed the judgment below against Dow, Matthews, and Moran, trustees and owners in possession, for a violation of the state statute fixing a maximum rate of three cents per mile for passenger fare.
This case thus fell within the general principle of the Granger cases, viz., that a legislative regulation of fares was presumably reasonable, and, there being no proof to the contrary, the carrier violating the statute would be liable to the penalties denounced by the state enactment.
The next case in order of time in the Supreme Court is the Minnesota case, Chicago Milwaukee &c. Railway v. Minnesota, 134 U. S. 418 (1889).
The principles established by this case, are that the legislative regulation of fares and rates, whatever its scope, is limited by the line of reasonableness; that if unreasonable they deprive the company of its property without due process of law, and that the question whether they are unreasonable is a judicial question which must be decided in a suit upon pleadings and issues, and upon proofs, (if the facts are controverted,) by the judicial tribunals.
Argument for Appellee.
It has been hastily thought by some that the decision of the Supreme Court in the more recent New York Elevator case of Budd v. New York, 143 U. S. 517 (1891), modified, if it did not overrule, the Minnesota case. But it does not touch or impair in any degree the doctrines of the Minnesota case. It does not profess to do so, and it does not.
The next and latest case in this court is that of the Chicago & Grand Trunk Railway v. Wellman, 143 U. S. 339 (1892).
The facts were these: In 1889 the legislature of Michigan passed an act fixing the amount per mile to be charged by railways for the transportation of passengers. The act provided a maximum passenger rate of two cents a mile for railroads whose annual gross earnings from passenger business equalled or exceeded $3000 per mile, in which class fell the Chicago and Grand Trunk Railway Company. On the day the law took effect, Wellman, the plaintiff below, went to the railway company's office and tendered $3.20 for a ticket from Port Huron to Battle Creek - that being the rate fixed by the statute- which was refused. He thereupon brought this action in damages under the statute against the railway company. The railway company answered. There were no other parties to the cause. On the trial it was agreed that the company's capital stock was $6,600,000 and had been fully paid in; that its bonded debt was $12,000,000 at 5 and 6 per cent interest; that the capital stock and mortgage debt represented the actual amount paid in to the corporation; that the railroad property was worth more than the capital stock and mortgage debt; that there was a floating debt of $896,906.40; that the entire gross earnings of the company from all sources were absorbed in the payment of operating expenses and interest on the indebtedness, and that the stockholders received no dividends whatever. The traffic manager and the treasurer of the railway company were introduced as witnesses by the company, and testified at the trial that by reason of competition with other lines it was impossible to increase their rates without losing their business.
On such agreed statement and testimony, and that alone, the railway company asked an instruction that the Michigan
Mr. Coke's Argument for Appellants.
act referred to was unconstitutional, which the court refused to give. Your Honors said, "The single question presented on the record is whether the trial court, on the facts presented, erred in refusing to instruct, as a matter of law, that the act of 1889 was unconstitutional." The opinion comments on the generality of the facts shown and the omission to show other facts, as, for example, that while it was agreed that the defendant's operating expenses for 1888 were $2,404,516.54, no showing was made of what such operating expenses consisted. The court decided simply that, under these circumstances, it was not error peremptorily to refuse the instruction asked.
Mr. Alexander G. Cochran, Mr. Winslow S. Pierce, and Mr. R. S. Lovell filed a brief for the International and Great Northern Railroad Company, cross-complainant and appellee.
Mr. J. W. Terry and Mr. George W. Peck filed a brief in the interest of the Gulf, Colorado and Santa Fé Railroad Company.
Mr. Henry C. Coke, (with whom was Mr. W. S. Simkins on the brief,) closed for appellants, contending:
I. The act of 1859 did not create any contract between the State of Texas and the railway company, and those interested therein, the obligation of which is impaired by the railway commission law of Texas.
II. The penalties prescribed by the Commission Act for violations thereof were not immoderate, excessive, and contrary to the constitution of Texas.
III. The act does not deny to the railroad company in actions between itself and private parties the right to a trial by jury of the issue of reasonableness or unreasonableness of any rate, rule, regulation, etc., fixed and adopted by the commission, contrary to the constitution of the State of Texas.
IV. The Commission Act does not deny to appellees the equal protection of the laws.
V. The Commission Act does not deprive appellees of