MERCANTILE TRUST CO. V. TEXAS & P. RY. CO.

529

MEnC\NTILE TRUST Co. fl. TEXAS & P. Ry. Co. et 01. FARMERS'LoA.'i & TRUST CO. v. INTERNATIONAL & G. N. R. CO. et al. MERCANTILE TRUST CO. V. ST. Lours S. W. Ry. CO. OF TEXAS et al. SAME 11. ,TYLER S. E. Ry. CO. OF TEXAS et al. FARMERS' LOAN & TRUST CO. tI. GULF, C. & S. F. Ry. Co. et al.

(Circuit Oourt, W. D. Texas. August 28, 1892.)
Nos. 186-190.

1.

RAILROAD COMPANIES BONDHOLDERS.

REGULATION OF RATES -

STATB ComUSSIONS -

RIGHTS OF

bondholders of certain railroads in Texas brought bills against the railroan companies and against the state railroad commissioners an d the attorney general, alleging that the full inte.rest on the bonds was not being paid or earned; thl/ot in most cases the earnings were even insufficient to pay operating expenses; that the'railroad companies were willing and anxious to meet all their obligations to oomplainants, but were prevented from exercising their judgment and discretion in making remunerative, rates of transportation by the defendant commissioners, under pain of the severe penalties prescribed by the railroad commission law. Act Tex. AprilS, 1891. Complainants claimed that this act was in violation of the constitution oHhe United States, and prayed an order enjoining the commissioners from putting or continuing in effect any schedule of rates prescribed by them, and'restraining them and the attorney general from suing for any penalties, or otherwise enforcing the provisions of the act. HeUl, that complainants showed a interest in the roads to entitle them to maintain thll suits. A suggestion of collusion between complainants and defendant railroad 'companies in 'bringing the suits was without merit, for whether or not the companies themselves could sue under section 6 of the act, and obtain all the relief complainants are entitled to, the latter are entitled to enforce tpeir rig-hts in the national courts; and that is not affected, even if there was a previous understanding between and the railroad companies that relief would be more speedily and effectually obtained in the federal courts.
TO SUE IN FEDERAL COURTS-COLLUSION.

S.

8.

BilIE-FUINGRATES-NoTICE-DuE PROOESS OF LAW.

Under section 4 of the act, which proVides that the commission shall give notice and hearing to the railroads affected before establishing any rates, the commission sent out'Ilotices to all the railroads in Texas that on a specified date they would begin thll classification of freights and the fixing of rates. On that day the representatives tif the railroads appeared, and for several days the question of classification and rates was discussed ill !teneral, but no J;larticular rates or changes from existing rates were proposed. Thereafter, and WIthout further hearing, the coinmission prpceeded to prescribe rates from time to time and put them in force. Beld, that these proceedings did not constitute "due process of law," and the rates fixed were void, under constitution of the United States.
LAW.

'"

, Section 5 of the act provides that, "in all actions between private parties and railway companiell brought under this law, the rates, char,;es, orders, regulations·. and classifioations prescribed by said commission before the institution of such action shall be held conclusive, and deemed and accepted to be reasonable, fair, and just, and in such respects shall not be controverted therein until finally found otherwise in adirect action brought for that purpose in the manner prescribed by sections 6 . and 7 thereof." Section 6 provides for actions by railroad companies against' the commissioners for the purpose of testing the reasonableness of the rates prescribed, and section 7 declares that in all such actions the burden shall be upon the companies 'to'show that such rates are unreasonable and unjust. Held, that section 5, and aU otherprovisions of the law which tend to enforce a compliance with the rates fixed by the commission irrespective of their reasonableness,. or tend to embarrass such roads as seek to invoke the protection of the federal'constitution against'the taking of their property without due process of law, are unconstitutional.

InEquity. Suits for injunction. tions. Granted. v.51F.no.9-34

On motion for temporary injunc-

FEDER'A.t'REPORTER,

vol. 51.

John F. Dillon, E. B. Kruttschnitt, H. B. Turner, and John J. McCook. 'for'oohl'plttinants., " ,!;; '1' , ;";,1' J. w.. Teify,J1liJ:.:G. Cochran, W.W.' Petkirts" and R. s,Uvett;'fdP dMendant railw'ay oofhpanies. GEm.:,' 'JJi J · .Brown,'and Hy. C. Coke, for rail, road commission of T e x a s . "
MCCORMICK, 'eircuit "k glance: at the pUb1i6 history of railroad interests in Texas will he1p us to see the true state of the issues joined in these suits. With sohle'triflinp; exceptions near the gulf coast, Tille, or, railroads wae,thllrefore. felt. When, by the compromIse of her claIms to the Santa Fe terntory', she ,the of I?u, hUc free,schoolslsh$.,adopted:the policy of loanmg thlslfund to aId m the lien: '; ,She,'also passed a generab1Awextendmg,donations of. land to aId aBdencourage tbese Febrt:\ary 7, 1854, law providing;,among other things: , "It at any tiqle to prllscrib" rates to be cbarged for. tbe·"transporta.tionl.lf, pprsolls and property upon any such road. should may exercise ,the every ten years: provfdl3d. tha't nortlducttoq 'SI,laJI be made unless the net profits of ,the t, ,the company being bona ftcIe,3ud" not with a vi'e)Y;,todefeat the, operation, ofth.la secLion. shall per ann umllpOD its capital stock. and amount toivllll equal to 12 .redu.ce prolit peI centum."

rn

These"e&erprises were in!afueaimre the civil war, but immediately on its olose the, people of Texas in the constitution

.

..

" system of int,ernal improvemel).tis palcnlated to develop the resollr,c.e.lI; and,prOqlote, the and prosperltyof her ci,tizens. Therefo.l'ethe legislature shall have power.;a,nd it shall be its duty to encourage tbe same. and'thelegisla'ture shall have'power to guaranty the bonds' o(I'llllr.Qltd amount, notex,ceeding Inaoy case the s'urn of $15,000 per mile." " .. "
".!" ,

Operatio;n the

1870.

!:ained in

was suspep.ded'by the Pllssa,ge of measures inn1867 , and the conatitution itself was sunew' ,which went ihto '[,un: effect March 30, qUioted',from the constitution 'of 1866 was not 8ubjeci it in
',]c' "','

i" " .,,,,, " ,

All p1l1bUolandB heretofore 'felerved for the benefit, of railroads. or rail. wa, shall to location and l'iul'Vey by any gen.
u

1,0,,"'5: ,

""

' .

Section 6 i " ! , shaH to any person or pecsons. nor sball, any certIficate oflal'M be !lold at the 'land office, except to actual set:tlers upon the same. and in lots not exceeding 160 acres, It ,. ,

MERCANTILE

CO: t:. TEXAe & P. RY. CO.

531

'"

This was speedily amended SQ as to auth.orize the legislature to make grants of land for purposes of· internal im prove!Uents, not to exceed 20 sections .of land for each mile of work, in aid of the construction of which land may be granted. Until the 15th of August, 1876, there was inTexas no general law providing for the organization road corporations, and up to that time such corporations could only be created by an act of the legislature. Upon the complete restoration of O'.If federal relations in 1870, many active individual and associated promoters of railroad enterprises pressed their projects on the legislature. The field was new and large, and many grants were obtained, some of which were arterwards deemed improvident. In 1871 a general act was passed to authorize counties, cities, and towns to aid in the construction of railroads and other works as those of internal improvement, and the same or like active who had soliClted the legislature secured donations, loans, or subscriptions to stock to their various projects from many counties, cities, and towns in the state, said aid taking the shape of bonds. as provided for in this act and in subsequent acts. These bonds of the counties, cities, and towns, as well as the bonds of the railroads themselves, were negotiable, and came to be held largely by citizens of other states, or by aliens; and, default being made in the payment of interest, much litig'ltion arose thereon, and more was imminent in the circuit courts of the United States. Several of the western states had preceded us in this career of progress, and the bittflr contro\'ersy, which had ripened into what are popularly called the" Granger 01seB," was raging, ....lti had not been settled by the supreme court when the Texas constitutional convention-the third in nine years-,-,rnet, in 1875. The constitution then framed, and which, having been adopted, went into effect April 18, 1876, emLraced this provision: "The legislature shall pass laws to correct ahuses and prl\vent unjust discriminatiun and extortion in the rates of freight and on the difft:' I ellt railroads in this state, and shall, from time to timt:', pass laws t'stab· Hshin!.!; reasonable maximllm rates of charges lor the of passengt:'rs amI frdght on sa,d railroads, and euforce all such laws by adequate penal ties." In obedience to which the legislature did pass laws establishing maximum rates of charge for transportation of passengers and Jreight 011 railor receiving a greater roads, and providing that any railroad rate shall forfeit and pay to the party injured thereby a penalty of $500, to be recovered berore any court having jurisdiction of the amount, in any county through or into which the passenger or freight mllY have been transportedj which laws are still in force. Several parallel and compf\ting lines of railroad were constructed through the state from south to north and frolll east to west, with many branches and dependent or independent connecting lines. Thpse all encountered the pecuniary embarrassment!! incident to the construction and 0 peration of new roads across .an undevel()"l,;';d territory, and nearly aUof them at .one time or another, than <;U1ce, had to submit to a process of rear,.'.0

I, .

:"',,. '"

i

),

_'

.

.'-.

532

FEDERAL REPORTER,

vol. 51.

the courts: From the very nature of the case and the state 6f'thErparties, resort was tisually had to the United states courts, ReceiverS were appointed to hold. and operate the properties pending the progressofthe chancery proceedings; earnings, beyond necessary operating were concentrated upon much-needed repairs and betterments; anclfor this purpose, to .some extent, earnings were antivipated, and evenJhe corpus of the property charged by the issuance of receiver's certificates. On the leading lines the service was conspicuously improved. The bondholder was getting no interest. He was either an alien or was a. citizen of another state. Traffic increased. Some roads completed theitreorganization, and began to pay interest on their bonds. Railr()an operations began to affect, more or less directly, every place and every person in the state. Systems of corlnecting lines were develS&hedultls were of officE:rs and employes came to attract attention. Many claims for damages for personal injuries or 0tijercauses were made against the roads, which were not allowed, and resOl't"'ifas had to the law courts. There'was no law prohibiting champerty'iil this state, (Bentinck v. Pranklin, 38 Tex. 458,) and the rule in stiitsfor damages against railroads wasthat the attorney for the Ollaintifi! 'had only a contingent fee, generally a half interest, in the amount he 'could recover; and in such trials before juries in all the domestic trial courts the argument of counsel assumed that tone of eloquentaccusation reasonably to be expected from sueh conditions. The 'volume ofacct.l'sation soon swelled beyond the jury box and the chambers the ?ourts, and patl'iotic' and ambitious eloquence began to fire the poplillir' heart with its fierce phillippics against the greed of associated wealth and of corporate power: The other side was not idle or silent; the'coritest between the adversary parties waxed warm. The legislature was their' Chrertmea, where the fight was furious. The legappeared to be unequal to the emergency. Congress had estabiished the interstate commission. A dozen or more states had established sta'tecoIilmissions. The call here was for a commission. One n:wst universal respect, who had, at a venerable age, retired to a chair in the law school of the state university, doubtE;ld the power of th.e legislature, under our existing constitution', to establish such a commission. Yielding 'to this au thority, the legislature' proposed an amendniE'nt to the con*itution which was iIitended to"' paMer that powei'. Its adoption was' at once made a party test by the controlling political party in the state. .Candidates for the legislature: and for all the state offices were nominated and conducted their c:anv:a!?s With reference to it Its adoption, and its immediate subnt, was which all e1' At the electIon held. the. 5th of November,· l$gO, It wascamed, and Its usual TexiismajoritybfJOO,OOO 01' mote. On the 7th of March, 18&7 t the supreme ha.d. decided the case Taxing Dist:; 120,U.S. 489, 1 Sup. Ct. Rep. 592, holdof Robbim ing what 'is 'popularly known. as the" drummer's tax" to be unconstitutional. A similar tax was being enforced by criminal process against

of

I

MERCANTILE TRUST CO. V. TEXAS &: P. RY. CO.

533

delinquents in this state, and our state court of last resort, on the 22d of June, 1887, in a well-considered opinion, declined to yield its own convictions to the authority of the Robbins Case, and refused' to enlarge a prisoner held for the nonpayment of said tax. Ex parte Asher, 23 Tex. App. 662, 5 S. W. Rep. 91. The prisoner sued out a writ of error to the supreme court. On the hearing in that court the present governor, then attorney ,general, appeared on behalf of the state of Texas, and made an oral argument. The supreme COUl't was not able to distinguish the Texas tax from the one involved in the Robbins Case, and on the authority of the Robbins Case and of Leloup v. Mobile, 127 U. S. 640, 8 Sup. Ct. Rep. 1380, reversed the judgment of the Texas court, and discharged the prisoner. Asher v. Texas, 128 U. S. 129, 9 Sup. Ct. Rep. 1. The United States judges in Texas were controlled by the decision in the Robbins Case from the time it was announced. On the 24th of March, 1890, the supreme court decided the case of Chicago, M. &. St. P. R. v.Minnesota, 134 U. S. 418, 10 Sup. Ct. Rep. 462. On January 13, 1891, the twenty-second legislature met. On the 21st day of that month the governor in hie general message addressed them in this language on the subject of "Federal Officers:"
"In her independent autonomy Texas should be sovereign and free in the management of her own domestic affairs. Cordially and with pride she claims and feels an interest in the federal union, as one of its important members. In all the powers delegated to it she cheerfully joins, to theend that the general government may be honored and respected within its legitimate sphere. In the administration of her own affairs slle expects and demands recognition and respect. For" many years past the people have been terrorizpd by the judicial arm of that govemment. not for offenses they have committed. but because they dread the menace of arbitrary power that so often threatens their liberties. Hemoved so far from the seat of government. it is difficult for the highest officers and courts to fully understand the frequent outrages inflicted upon the innocent people of this state by inferior otlicers and the subordinate federal judiciary. :Ie ... ... The gracious writ of habeas C01pUS has been abused more than one time by a federal judge to obstruct the collection of state revenues, or in releasing citizens held in obedience to the or, del'S or warrants of state courts, whose rights could have been asserted through the regular channelS of the state jUdiciary. Some of the railroads have been placed and held in the hands of receivers long beyond the term prescribed by our state laws, and occasionally are operated by nonresident receivers under the orders of federal judges in other st;ites. With respect to property the decrees ,and opinions of the state's highest courts are held for naught and in contempt. to the injury of the citizens and the humiliation of the people. Several of these roads. without forecloSure proceedings. have been permitted to increase their incumbrances to the detriment of the public and lawful creditors without check or hindrance. and from all appearances, to an ordinary citizen or skillful observer. a,s he learns of the exorbitant fees an<l salaries paid to useless officers in' the apparent indUlgence of favoriti,sm lJ.nd nepotism. the cmmection of the judges and officers with therecei'ferships and roads would dem.and investigation., .. * 'I< Honorable exceptions to all sUch misconduct among federal officers exist in this state. They are well known and fuJly appreciated by the public. In view, however, ... ... .. .of the peculiar conditio.ns surrounding the railway management of the state,

,

,1 .. :

RE.P9RTER,

vol. 51.

been sllOwn 1)y some of them and her intheadministration ofpubllC affairs. .doubtlesS 'C?,me When'dlltYW:0\lld impel 0lil' the part of the own ex:petlse to have such' matters j'uvestlgated. to the end thll:t and punished, and all stains created by such Bllspicions'removedfroIO/the innocent. ,The citizen would be helpless in a sllch OffiOI·flil.,but the state.is lJ.mplyable to enter into it and standJpecost. If been done byany federal officer to the dignity of state, there afe before which he can be carried. and justice sUital,ly administt'red to 'him. In view of the premises. your honorable bodiellare,rpsppctfully requested to place a suitable appropriation at the commah\l of the executive for 'use in defraying the expenses of all nel'essary prosecutiulll!l in the protection of ,ber rights· in ail respects as a sovereign state. I t 22d Leg. 'fex..pp. 114, 115. The railroad commission law, set out in. full in the margin, was enacted and approved April 3, 1891. 1 The original bills in these suits were filed on the 30th of April, 1892, and notiCe given thatcornplainants owouldprt'sent their motions for hearing before me at Dallas, Tex., on the 16th of May, 1892. Before the day set for hearing arrived, I advised counsel that I could not heDr the motions at Dallas on the 16th of May, but would hear them at New Orleans, where I would have the aid of the senior circuit judge, on the 23d of May. At of the defendant the attorney general, for the was postponed, and the motions reset to be heard at New Orleauson .the 23d of June, and again at his request a further postponement was allowed and the hearing set for July 20th, lI.LDll.llas,'l'ex., at which last-named date and place the hearing began apd coritinuetl from day to dil)', until and inel uding the 30th of July. eminentlawyers.ofdistinguished reputation for ability and learning, of wh()m showed l;l. cOlIlph;temastery of the essential features of the' whole record, and a minute and perfect knowlectge of the details of the par.t to which he specially addressed his argument, were heard without limit. The record is large,-bills, answer:;, exhibits. affidavits, a burden for two strong men, I ouserved, when it was brought to me. 'the ofthe legal profession was exhausted in the citations of . authority and thereasoJ;ling of the experienced and skillful soHcitors. I was specially requested to consult .andcarerully consider the ri:lferences to' over 50 volumes, which were furnished me with the record. 'fhe of case must tax the faculties of a single judge, and the reaponsibility,of it might well appall his perceptions and judgment, but for {act, alluded to by the. attorney genel"al when he said,. in his oral "this will go to the supremeconrt." The most vHalquestioninvolvedhas, from the 19th day of June, 1215, (we need notgobe'yond that date,) engaged the supremeattenThe principle underlying it is the 1:/edrockQf oQ1' bider llnd stronge'r than our written constiPllt well in 'both. Its tQltle

Ws

MERCANTILE TRUST CO. V, 1'EXAS:&P. RY. CO.

535

to issues similat to -those here made hlls'been so fully considered of 'late years by the supreme court, and so elaborately discussed in their opinions, as to forbid anything 'more than a reference to their latest decisions. As stated in the brief of one of their counsel, the two trust companies. complainants, are trustees of various mortgages executed by the several defendant railway companies to secure bonds issued by those companies, respectively. The individual defendants are Reagan. McLean. and Foster, who were appointed and qualified l\S commissioners in the manner prescribed in section 1 of the Texas railroad commission act. These defendants organized the said commission on the 10th of June, 1891. from which date they have assumed to be and to act as the railroad commission of Texas, and are exercising and claiming to exercise -all the powers and functions conferred,orpurporting to be ferred, by, the said act upon the said railroad commission, They have established and undertaken to enforce, in respect of all the deJEmdant railway companies, such rules and rates, and have made and are enforcing the other orders. as set forth in the bills of complaint, and Exhibit 0, thereto attached. The defendant railway companies have filed cross bills in the several cases. The bills and cross bills raise substantially the same questions. One ground for relief presented by the bills i8"'£hat the tariffs, schedules,and orders of the commission, viewed as laws enacle(funder the power delegllt 'd by the legislaturt', ara unconstitutional and void, because the tariffs. scheduies, and orders established by the commission, complained of in the bills of complaint, IU'e unreasonably low and confiscatory." Ailotherground is: "The railroad commission act of the If'gislatnre of Texas, in tberespects complained of in the bills of complaint, is unconstitutional and void; because (1) it purports to confel'upon the commission power and authority to establish the tariffs, schedules, and orders above recited; (2) it denies torai!way companies the right, in suits for damages and penalties denounced by the act, to interpose the defense that the tariffs, schedules. or orders of the Commission, with respect to the violation of which said damages Ol' penalties may be claimed, are unreasonable and void, and I n such suits it denies to the railway companies the right to a judicial inquiry in this behalf, thereby denying to railway companies subject to the act the equal protection of the laws, and subjecting them to condiLlons nnder which they are deprived of their property without due process of law." The relief prayed in these motions is a temporary injunction, until the hearing against the rail way company, from putting or continuing in effect the tariffs, circulars, or orders of the commission. and restraining the defendants constituting the commission, and the defendant Culberson, and all other persons, from instituting or causing to be instituted '!luits contempla:tedby the act for the enforcement ohmy claims arising out of its provisions,or out of any of the tariml, circulars; lind orders prescribed by the commission, and enjoining the commission from making· or delivering to the railway companies any further tari'ffs; oirculars. ol'Qrders. The contentions of the defendants Reagan, McLean, and Foster and

536

:FEDERAL REPORTER,

vol. 51.

CulbersOn, as far as deemed material to notice, are (1) to.at the bills do not show the right of the complainants to sue; (2) that the suits .are believedto.he collusive andpreagreed as to the defendant railway company; (3) that as to these defendants the suits are really against the state. H is·apparent from the, whole record and the conduct of this hearing that the controversy is not between complainants and the railways, but between the railways and the other defendants. Thebills of complainantaand the answer and lcross bills of the railways, and the arguments of their counsel, show that> there is no such element of collusion in these cases'8.S can prejudice therightsof complainants to sue. The cases cited and pressed by counsel for defendants on this point are plainly different from the CaSes here. 1,'he complainants. here show equitable interest in the fair earnings of the rQadl;;j they show actual ownership and possession oUhe mortgage securities of the roads, both of which they allege are heingcirreparably injllred and threatened with destruction 'by the defendants:;they show that the railways willing and want to meet all theh"Qbligations as mortgagors in possession, but that said railways are coerced by the defendants, armed with the railroad commission act, and the directol's cannot eJl;cr<)ise their judgment and discharge their duty as they: should and would butJor said coercion. It may be that the railway companies could, under .section 6 of the railrolld;eommission la,WI, qr. withouqhe authority of that section, have brougbt:thase.suits and Qbtained all the. relief tow,hieh the complain.a:nts are .entitled against the other defendants,or it may be that they eould not. If they could not, that would only be one additional reason why the complainants should sue; and, if the railways could have so sued, that would be no reason for denying the complainants any right, if, a$,se,l!m.s tobe,.htntep charged, the railways could onlyhaveresoded to theatate courts; and that there was a previpus understanding between the complainants and the railways that the relief complainants desired and believed themselves entitled to receive, would be' more likely to be sp&edily and adequately extended in the national courts. It was to meet such caSes that the national courts were eMablisped. .In them parties "may hope to escape the local influences which 'Sometimes distQrb the even flow of justice." Daoia v. Gr.ay, 16 Wull. 221What has already been said expresses sufficiently my view as to the suggestion, and the authority in its support, that the injury inflicted and :threatened, Hany, was done and directed to the mortgagor in possession, and is too remote to give the complainants the right to sue. It may be conceded. that there is no express decision of the supreme court or of other courtSQflluthority on this question, but as. to this point the case .of P&ikv; Railway 00., in 94 U. S. 164, is substantially the same as .Q8.Se was strongly· controverted. Lawyers of the these cases·. highest arguep it elaborately and at great length in the supreme court. ,The Bamequestion was involved in the case of Stoney. TruatOo.'i, 116 U. S. 307,6 Sup. Ct. Rep. 334, 388, 1191; and, while the failure. to raise or notice this question in the progress and de-.

MERCANTILE TRUST CO. V.TEXAS &: P. RY. CO.

53',

cision of those cases prevents their being relied on as authority on this point, the fact that it was not raised or noticed is persuasive in the direction of the inclination of my judgment in this case that complainants show a right to sue. The case of Murdock v. WoodBon, persuades to the same conclusion. 2 Dill. 188 et seq. As to the contention that these are suits against tbe state, it seems clear to me tbat the latest decisions of tbe supreme court settle tbat question against tbe defendants. In Pennoyer v. McOonnaughy, 140 U. S. 1, 11 Sup. Ct. Rep; 699, tbe construction and application of the eleventh amendment is fully discnssed, tbe earlier decisions reviewed, tbeir doetrine extracted, and the line clearly marked between tbose cases against state officers which are suits against the state in the sense of that amendment and those which are not, and these cases come 'plainly within the latter class. As suggested to the counsel at the hearing, we cannot reason against the authority of the supreme court, nor give it additional weight by our indorsement or argument. Where, as in the case last cited, that court has construed the earlier cases and announced the rule, the limit of our office is to arrive at tbe right in the cases on trial by that rule.. And it appears to me not to admit of question that, on the authority of that case, these are not suits against the state, within the meaning of tbe eleventh amendment. We come now to consider, have the complainants made out their case? Are the rates being enforced against tbe railways unreasonably low and confiscatory? Is tbeir property being taken, or threatened with being taken, without due process of law, or are they denied the equal protection of the laws? And, if so, what measure of relief, if any, can· this court now extend to tbe original and cross complainants? From the sworn pleadings, the exhibits, affidavits, and unquestioned statements of honorable counsel conversant with the facts made during the argument in open court on the hearing of these motions, I draw my conclusions of fact touching the matters now deemed material. On these essential issues the complainants and cross complainants have offered the affidavits of the present or former chief officers and employes of the companies,-witnesses most conversnnt with the facts, and with regard to many of whom the defendant the attorney general, in his able oral argument, was candid enough and generous enough to say: "I know them; they are respectable gentlemen, of high character, who would not and could not willfully make a false statement." In the race to occupy territory, or to avail of the state's donations of land, or to get a basis for the issuance and placing of their bonds, or to meet the crying want of communitiell along their prqjected lines, or for one, or more, or all of these considerations, the defendant railways hurried the construction of tbeir lines, and opened them for business in a green and unfinished condition, with unseasoned roadbeds, ties, rails, culverts, and bridges, and rolling stock not adequate to mov:e or bear the weight of their present traffic, and with very little terminal and waystation equipment. That in large sections of the state through which these railways pass, the most fertile, fully occupied, and developed, and

538',
chatacter Qf

.U"

,'f'i 'n!>.l:RALREJ,>9W,EERI

vpl.,

If

fnmtishing:th&,

i

:d:ifficult 'anll ,eipen¥.!¥lipw,in,a sOQud rp,apblld" an!l. to keep the

as

tratpo, ,the

em,cient.· That the cost of conthetime,wqen were respecQIH:ned fOf: of the pI:9,ver cost of plant as T4atthis their ,p+!lnt as ,it exists tbe(J!\se of each railwa,y,s,th,e amount Of,lt§ .rr,ha,t ))6pupiicated onl?: by goitlg:lfQrough a, simHarprQcess"q£ that even with the l'rl;lll,le of and equipm'lmts,iJll\l..AWri,I\l, of the same interior such duplicates, wi,th ,rqadbeq., tr,q,pk'i TQlllng way-statiQu f",IlUit,\¢Jl, ppt, constrllq@, now for less lUoney tb:m ·. That roads pave imprqpeI;uses·.. Th;lUheir rates for, passengers by ti),ey have charged and carriage w.ithin the maximum allowed by law, cQnditions pertuit such rates as the commerdal and pear. Thatsaid rates have always imen,mJ1<m io:wer thap andcharg!ls Jor like, of prjortnthe qpepjqgqf said: pone of these railwa,}'s, tIm, Gu,lf OOll;lpa.ny"p.nd eigh,t ago, has ever ,paild,aIJY, haye had to s,1,1b· mit to the qf fot,'ecl,,?sure pr,oceedings,: two tiIIilte,ra,nd the;qulfQompllny,;which has so far esorQllal, a flop.tingdebt, including interest of , .. ' I ,t.h:e briefof

Qutop being required, and these not

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Ii ,

.

"Witii'lilheonilidprable exel!iptions,not'.'re!3ulting in increased revenues. the 'Comm.fssion·hasreduoed evary tariff which it touched. ',('btl fa«ts establiShed by t.he .prMfin.e\'.Ch case, may be thus
. ; ,. : ':" "THE 'TEXAS &PACIFIO CASE. , ,

operation of prevailing com,mercinl and competitive conditions, and at the series of ;reductions inwere . so. inadequate paymentt?fthe e,xpenseso'f and repairs and the cost of rlecessar)" ,betterments and equlpment, was tI nable to earn more 'than ·its' and fixed: mortgage indebtedness. namely, 5 per cent. 'OD 'au $17.182.60 per mile ofrroad . operated. equi va;.lent to 6 ;per:eent. on oidy $14.31l:l.50 per, mile of road qperated. Thes!! earnJpossibility of payment of interest company'1't second bonds. or or any di its ..,: .. . "(2) froriJthe application of the commission'8 rates to.. of bliSjness transacted .fro!D . time when these rates were de'Cltrtt!l!'to be effective until the 31st day 'Of Mllrcb,1892, (about seven months;) bas thesutri of $21L2.72l'.61. the entire 1058 being in net

MERCANTH.lE TRUST CO."; TEXAS &:

RY. CO.

539

revenue.' The property of thig,company was'in the bands of receivers during the years 1885-1888, in sUitstb forecloseitsltJOrtgllges, and was tt'storedto the 'co'in:pany in the latter year, after a reorganization of its indebtl'dnt'ss in-. Yolving heavy losses to itSSeCUI'ity holdf>rs and a substantial redudion of its fixt'dchl\rges. Its stockholders were compelled to contribute an assessment of IV per cent. upon the par value of thf'irstock,aggrp,gatinl( about $3,000,new capital-was expended l,1pon the property in its 000. This irnproyement. belteppent, recollstruction, and equipment, and the neceSHary cost of reqrganization.. , "
"THE OOTTON BELT CASES.

"(St.Louis Southwestern of Texas and Tyler Southeastern.) . (1) 'I'hese companies did llottake possession of thE'ir respecti ve properties until June I, 1891. and hence the l'ates prevailing prior to thEl announcempnt the light summer munths of the commission's tariffs affected'them of June, .July. and August, and a part of the nlonth of :5eptember. 1!)91. "(2) Under the rates established by the railroad commission, thest' companies are not aule to earn necessary operating The earnings of the St.Louis Southwestern of 'rexas for the pleven months ending April 30, 1892, felt short of providing for necessary expenses of operation by the sum of $29,172.66. The earnings of the Tylel' Southeastern Company for the same period fell short of providing for necessary expenses of operation by the sum of $48.851.99. Both of these companies have been compelled to bortow inoney to covel' the deficit in theil' earnings to meet operating expenses, and to prOVide 'for the interest on t1Jeir fixed mortgage obligations. The St. Louis 80ltthwestern of Texas owes a floating debt of over $275,000. and the Tyler SOUtheastern of over $43,000, incurred for these purposes. The properties of these companies were purchased by them in the ea1'ly part of l!)!:I1 upon sales under suits to foreclose the mortgagf's of thl'ir predecessor companies, the St. Louis, Arkansas & Texas Railway Company of Texas and the Kansas & Gulf Short Line. '£he new companies were organized on a basis of largely decreased fixed charges. .
"THE INTERNATIONAL

&;

GREAT NORTHERN CASES.

"(I) The rates fixed by the operation of commercial and competitive conditions. and, in effect, at the time when the series of reductions inaugurated by the commiSsion was commenced, were so low and inadequate that this company. aftpr the payment of the expenses of operation, was unable to earn the interest upon either class of its bonds. For the year ending Decl'mber 31, 18!H, its net or surplus earnings amounted to $443,637, or $34,003 less than the interest charge upon its til'st mortgage bonds. These net earnings would only suffice to pay an interest charge of 6 per cent. upon $9,540.67 per mile of road owned and operilted by the company. For the three months ending March 31. 1892. the necessary operating expenses of the road exceeded its earnings by the sum of $!:!O,109.09. "(2) The actual loss to this railroad from the application of the commission'srates to the volume of business actuallv transacted from the time when these rates were declared to be effective until the 31st day of March, 1892, (about seven mont.hs,) shows a greater loss than at the rale of $200,000 per annum. For upwards of three years last past the railroad and property of this company had been in the hands of receivers appointed by the district court of Smith county. Tex. By reason of the insufficiency of its earnings, the railroad company was unable to pay the interest upon its first and second mortgage bonds during the year 1889 and subsequent years. In the defau,lted interest upon its first lDortgage bonds amounted to $1,441,720, and UpOT. its second mortgage bonds to $1,269,720. In that month an agreement of 'reorganization was entered into between the company and its secu-

540

FEDERAL REPOt;t-'.1'Ji:R,

vol.

rityholders, involving the funding of all defaulter] interest. and the reduction: ofa.1I future interest upon the second mortgage bonds, and thA deferred payment of a part of the!defaulted interest upon tbe first mortgage bonds. The stockholders of tbecompany were oompelled to. contribute new capital totJheamount of over $l,OOO.OOO.-about 11 per cent. upon the par value of the outataDding capital st\)Ck. of the company. "(1) The rates flxfdby the operation of prevailing commercial and competitive conditions in effect at the time wben tbe series 'of reductions inaugurated by the commissionw8B commenced were so low and inadequate that tbis company, after the pllyment of the .expenses of operation and repairs and ,the £ost of lIecessalW betterments and has been unable to e34'nithelnterestuponits first mortgage llonds. earnings fallin/{ short in: tbeyear,ending June :30. 181U, of an aQlount sufficient to meet such interest ititb'e 811m of $28l:j.906.81.Theseearnings excluded the possibility of payment of any interest on"the company's second mortgage bonds or of any dividend, upon ";(2);.The actual loss totbis company from the appUcation of tbe commission's.rates to business actllslly transacted for the eigbt months ending February29i 1892, in comparisQn with the Ilameperiod ending February 28. 1891. aggregates the IlUlll of about $300,000. The bonds of this company are issued 'at the :rate of $12,000 Pill' mile of firllt mortgage bonds j $8,000 per mile of secgnd:mOltgage bonds; total, $20,000 per mile of road, owned by the company. In or4er to optain the sums of money to defray the cost of necel!sary betterment, improvement. and equipment of its property. and to meet the deficits of earnings to pay the operating expenses aod interest on bonds, tbiscompany bas been compelled to borrow large sums of money, and it now owes a fioating.debt incurred for thesepurpuses, including unpaid interest coupons,. of u.:pw8rdof $3.S0Q.OOO." That of said railways put the commission, tariffs complained of in effect on its lines under protest and under coercion of the severe provisions to suits. against it for damages and penalties should it refuseor.faiL.toso put them in effect. That the number of suits to which they· would otherwise daily become liable amounted to many hundred: ..... "The legislature has power to fix rates, and the extent of judicial inisppotection agahlst unreasonable rates." Railway Co. v. Wellman, 143 V.S. 344, Sup. Ct. Rep. 400. "The question of the reasonableness of a rate of charge for transportation by a railway company, involving"as it does,; the element of reasonableness, both as regards theC0!llpany and as regards the public, is eminently a question for Judicialin\restigation, requiring due process of law for its determination. 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 fs deprived of the use of itg property, and thus, in substance and effect, of the propeIiy:itself,without due process of' law, and in violation of the constitution or United States; and in so far as it is thut' deprived, while other persons are permitted to .receive reasonable profits on their invested capital, the company is deprhl'ed of the equal protection of thlt laws." Railway Oo.v. Minnesota, 134; U.S. 458, 10 Sup. Ct. Rep. 462.
"THE atf.vF, OOLORADO' '" SANTA FE OASE.

MERCANTILE TRUST CO. 11. TEXAS &: P. BY. CO.

541

If sucb deprivation is shown here, does it take place in the absence of
an investigation by judicial machinery? It must be conceded that as between private parties and the railways no such investigation of the reasonableness of the rates is permitted by the railroad commission law of Texas, for that intent is expressed in section 5 in term!! too comprehensive and plain to be modified by construction. Two of the members of the railrqad. commission are eminent lawyers. It may, I think, be fairly, if not conclusively, presumed that before the .commission under. tqok the work of establishing rates they had the advice of the very able attorney general as to the. sound construction of section 4 of said act; and, as defendants herein, said commissioners and attorney general cannot complain if I assume that the practical construction, which in the discharge of their public duties the commission have placed on 4, is the sound construction. The following is a copy of the notice which the commission issued and had addressed, and sent. through the mails, to the general freight of the railroads of Texas: OF RAILROAD COMMISSION OF TEXAS. "AUSTIN. TEX., June 20, 1891. "lien81'al,F1'eight Agent--- Railroad-DEAR SIR: In accordance with the l'equirements of section 40f the act creating the railroad commIssion of TexRs;passed at the regular session of the twenty-second legislature, and approved ApI'n 3. 1l:l91, the railroad commission of Texas will. on Monday, July 6. 1891. begin and. continue from day to day, until completed. the clasand subdivision of all freight and property, of Whatsoever character, that may be transported over the railroads. of this state, into such general or special classes or subdIvisions as may be found necessary or expedient. and the fixifrg for each class or subdivision of freight a reasonable rate for each railroad. subject to this act. for the transportation of each of said subdi visions or clasEll's; also that at the above-naIlled time and place a special classification, and rates of charges thereon of cotton, grain. lumber, and I!alt will. be made. Your attention is also called to section l:l of the act aforesaid. which provid\"s that. in all cases where the rates shall not have been fixed by the commissioll, no changes shall be made, except after ten days' notice to and COllsent of commission.. Therefore the changing of any rates in force June 10, 1891, except after notice as above provided. and the consent of the commission, is unlawful. "Please.acknowledge the receipt of this notice. and oblige. "JOHN H. REAGAN. Chairman. ",r. J. ARTHUR. Secretary."
"OFFICE

Atthe date named in said notice representatives of most; if not all, of the railway companies in Texas appeared before the commission, in session at Austin, Tex. No proposed change in existing classification or rates was indicated by the commission, and no issue was submitted ;Which could be either agreed to or made the subject of proof or suggestion by argument. The commission in their answer say: .. The said commission had just begun the investigation of the classification and rates of said roads in the state. and had at the date of said conference either upon any classification or rates." not

'II

oh the 'said '6th bfJuly; 1891,luid:-the several fl;)i' his',roadjdescribes tbatassize'ns I' a sort of ineHing;:" and another one' of the' c&unMI,whowalJ 'the it as a Jiib&':O/ Cna,utauqua class; free lec,turesoli' thl.' general subjects of railroad freights, clas'fates were invited froma1'l chniers, whiehcould result in Iliothin!f;unlessia 'Babel,with of tongues. 'The defel'idltnt cotiimissiotierssliY. ih1, their answer: ', "ThCl said cohrerence, beginningoii"Jtlly'6, 1891, lasted for several' days,a.nd all 'freight rates in Texas were'discussed and considered;" and again.: "Deferidants aver that thesessi\:Jrlbegurl' J111'y6, 1891, hasnever terminated or been ad" Jotun't'd at all,ahd'thatall the rates complained 'Min said bill, or which been fixed by said 'commission, have been ,fixed at the session aforesaid;" nlid'agaiti: ,u Defendants further admit that said commission"is proposing and proceeding to make and promulgate dthp.r rates and tariffs without other formal notice than that dated; JUne 20, 1891." The suggestion,; that. inrlicated "due pfQ<leSS of law," within t4", ,meaning of the provisions of the constituor " an by' ,within, the, meaning pf court, can 'hardly be setioualy made by the sound lawyers who have appeared to resist these "motions., And the subject is too grave for'jest. U. S. v.Lee, 106 U.S. 196, 1 Sup. Ct. Poin,dexter .Gteenhow, 114 U. 8.270, :5·Sup. Ct. Rep. 903, 00. iV, 134 U. S. 418. 10 SUI?' Ct. Rep. 462. 'Eohbina, 8 OityoJ Louw1!ille v.Cochran, Ky. 15. ' It ;la, however, .fIeriously urged' that cpnceding that BIilPtlOn 4 does not pro,vide due process of law, as mE;lantby ,the constitution,; and, that sectioot) isunconstitntional; the railroad oommission law, without section 5' and its related 'sections, and the work of the commission, may still be without legal ground for the relief they is ,wholly inconsiatentwith the position assumed bytQe. leading :Bd,·ocates. of the commission in their public addresses to the people, in the: canvass :now pending in Texas, of which, on a hearing in chambers, I may be permitted that far to take judicial notice. In,at least one public address hisexceUEmcy, our present governor, in discussing the subject of the Texas comQ1jssion, and especially section 5 of the railroad commission law, certainljsaid in substance, with zeal telling iteration, 5 was the heart of this Iaw, ,Aflcl it and its related sections the, of the Texas railroad commission.And ;according,to my stugy of this law, in,that lI.ndto ,that extent, his the laW :was s0tlu,d. modeled. the into Which, to infuse by section an<i).ts relllted sections. It is evident on the face of the law-as we know the fact to its fraD'lel'S' were: thoronghlyiconversantwith, and kept steadily in their vi",w, the deci!lion of the supretnecourt in the Minna;. aota case, then but latEily annoui!Ced. The ac.tappears with studious, foll,oWiolt" dliys, to

01 'the 'eotinseF.far the :cioss '6dmplliin1l.6ts, who was preseht 'before

MERCANTILE

CO. V· .TEXAS

RY. CO.

54::>

but ,wit'Qillogical, ingenuj.ty,to,endel:!vor to contrive.,q. ,due process of w.asproceeding, permit the law that would, ing of the willof< tbe 'commissioners', however arbitrary and m:ightbe,and might eventually he proved ,to be. It \yRS,',w;eU, did possess tW<:lliim the power to enforce rates fixed by It, the lished cOl,l;rtsof J!.nd th1lt the ot <;Jther sfutesl with "perhaps one or two exceptionS, did not have or,daimdhe power'to Inx' conclusive rates. It was eYidently thought that a"11 these were:ine,tI%im'it'; 'commission woul4not meet' the exigeocyof its rates could be inquired into that guild of able IJ!.wyerR, of 'at given point on, their spective; therllilroad managers would showsmaU respect, to the promulgations ,of this advisory committell',as they cOhllidered, the commission would be if the reasonableness of its rates. blight in 'every'case 10 the' ", Hence, the" mall)" and' severe fOli cqpstraiJ;lillg the whatever rates the migbt.impose until, by a new patent process, the 'roads recover the right to hold up the shield'ofthe constitution against unreasonable rates.' ' ) .. ,It every provision of this tends t<;J,thu.s eQfor{}ea comphancewlth the rates of the they be 'rel¥lo,llll.hle 'or not,aAdevery pr9yision tending to, elubar.rass' ,or enabling the commissi<i>ners to I:Qa:ds as may choose, to invoke the protection of the constitution: agtlinst the taking of their propertY' without the due process of law, or denying them the equalprotection of the law, is affected with the same vice that renders section 5 invlllid. ,,It follows from thetriews thus far that these. motions ShOllldli. that the yery niany other most iilter;esting questions presented in the record ,and in argument on thif) bearing are not material to be considered now. That the measure· of complainants' and erosscomp1ainants' relief shal1'be adequate it is necessary that it should be 'as fttll'a;s they' have asked. And it iSBo ordered. '
THE ORDER.

In the Oircuit Oourt of the Un:ited States for the Westem District of , TeXas":'-In Equity. No. 186. Original Bill. The Me1'cantile Trust 00., Trustee Oomplainant, against and Railway Oompa,ny, John H. Reagan, et al. Cross Bill. The Te:x;as and Pacific Railway Company, Of?,mJ)lainant, against The Mercantile Trust company. John El. Reagan. and others. , Tbemotions of complainants under the above-entitled original bill and cross bill, having come on to be heard upon the said original bill and cross bill,and upQn the to said original bill, and of the defendH. William P. McLean,L. L. Foster. and Charles A. Culberson, to .said cross bill, and upon the affidavits on file, and the same bllVingbeen argued by counsel for the respectivtl parties, and thecoosideratloo had, it is now l-tpjudged, otdered,and. decreed: .

DDERAL REPORTER,

vol. 51; "

(1) That \tiltH further order ofUils court, 'or of the)bdges hel'eof, the defendant the & Pacific Railway Company be, anct: it is hereby, restrained from puttjng or continuing in effeet ,the tariffs, circulars, or orders of the rail. Qf Texas, and each and all of them, desctibe<i in the bill of complaint and in Exhibit C thereto, and therewilih tiled, and ,from or continuing to charge the rates specified in said 'tariffs, circulars, orders, or either or any of them. (2) It is further ordered, adjudged, and decreed that the defendants, the railroad commission of Texas, and the defendants John H. Reagan, Wm. P. McLean, and L.. J,. Foster, acting as said railroad commission. of ,.rexas, and their successorll in offi,ce, and Charles A. Culberson, acting as attorney general of the state of '.rexas, be. they are hereby, enjoined and restrained from instituting or authorizing or directing any others to institute any suit or suits, action or actions, against the said'l'ailway companifor the recovery of any penalties under and by virtue of theprOV'isions ,of said act of the legislature of the state of Texas, approved on the 3d day of April. 1891. or under or by::v;irtue ofl;lny of the said tariffll. orders, or circnl;lrs of the said railroad cQmwiasion of Texas, or any or eithel' of them, or up.der and by virtue of the,said act, and thq, said tariffs. orders, or circulars of said commission, or any or either of thetn com bined; and restraining said defendants Reagan, McLean, and Foster, an,d the railrOad Commission of Texas, from certifying any copy or copies of any of said ordersi tariffs, or circulars, or from deliver. ing. or causing or permitting to be delivered, copies ,of any of said orders. tariffs, or circulars to the said Culberson, or any other party, and from furnishing the said Culberson, or any other party, any information of any character, (or the purpose of inducing, enabling, or aiding him, or any other party, to institute or prosecute any suit or suitsagainstthe said railway company for the recovery of any penalty or penalties under the said act. (3) It isturther ordered,: !ldjudged' and decreed that the said railroad com· mission of Texas and the said Reagan.' McLean. and. Foster be restrained from making, iSSUing, or to the said railway c9mpany, or causing to be ia!lued or delivered to it, any further tariff or tariffs, circ,ulars or orders. (4) It is furthElrordere«;l, adjudged, and decreed that all other individuals, persons, or corpotations be, and they are hereby, restrained from instituting orprosecuting'any suit or suits against the said railway company for the .covery of any damages, overcharges, penalty or penalties, under or by virtue of the said act. or any of ·its· prOVisions, or under or ,by virtue of the said ,tariffs. orders, or, circulars: of the said railroad commission of. Texas, or any or either of them, orby .,irtue of the said act, and the said. tariffs, orders, or circulars, or any or either'of them combined. . A. P. MCCORMICK, Circuit Judge, Fifth Circuit. In chambers at Dallas, August 22, 1892. The same order was made in each of the other cases.
NOTE.

The railroad commission law, (Act April 3, 1891,) referred to in the opin. ion, is as follows: .·
Section 1. Be it .enacted by tbe legisiatura of the state of Texas, that a railroad commission is hereby created, to be composed of three persons to be appointed by the governor, as follows: If the legislature be then in session, the governor shall, upon the taking effect of this act, or as soon as practicable, by and with the advice of the senate, if the legislature then be in session, appoint said commissioners; but, if the legislature be not In session, the governor shall make such appointments, and each .commissioner so appointed shall hold his office until the second Monday after the inof the next governor" and until hisliuceessor is appointed and qualified. succeeding governor shaU, on the second Monday after hiS inauguration, or as soob thereafter as practicable, appoint said commissioners, who shall each

MERCANTILE TRUST CO.

f).

TEXAS &: P. BY. CO.

545

hold his office until the second Monday alter the inauguration of the next suooeeding governor, and until his successor is appointed and qualified. (a) The persons so appointed shall be resident citizens of this state, and qualified voters under the constitution and laws, and notless than 25 years of age. No person shall be appointed as such commissioner who is directly or indireotly interested in any railroad in this state or out of it, or in any stock, bond, mortgage, security, or in the earning of any such road; and if such commissioner shall voluntarily become 1\0 inter· ested his office shall become vacant; and if any railroad commissioner shall become so interested otherwise than voluntarily he shall, within a reasonable time, divest himself of suoh interest; failinp; to do this, his office shall become vacant. (b) No commissioner hereunder shall hold any other office under the government of the United States or of this state, or of any other state government, and shall not while oommissioner engage in any occupation or business inconsistent with his duties as such commissioner. (c) The governor shall fill all vacancies in the office of commissioner by appointment, and the person so appointed shall fill out the unexpired term of his predecessor. (d) Before entering upon the duties of his office, each of said commissioners shall take and subscribe to the oath of offioe prescribed in the constitution, and shall, in addition thereto, swear that he is not directly or indirectly interested in any railroad, nor in the bonds, stock, mortg'ages, securities, contracts, or earnings of' any railroad, and that he will, to the best of his ability, faithfully and justly execute and enforce the provisions of this act, and all laws of this state concerning railroads, which shall be filed with the secretary of state. ' (0) Each of said commissioners shall receive an annual salary of U,OOO, payable in the same manner that salaries of other state officers are paid. Sec. 2. The commissioners appointed shall meet Austin, and organize and elect one of their number chairman of said commission. A majority of said commissioners shall constitute a quorum to transact business. Said commission may appoint a secretary at a salary of not more than $2,000 per annum, and may appoint not more than two clerks,' at a salary of not more than $1,500 per annum each, and such other persons as experts as may be necessary to perform any duty that. may be required of t,hem by this act. The secretary shall keep full and correct minutes of all the transactions and proceedings of. said commission, and perform such duties 88 may be required by the commission. The commission shall Iiave power to make all needful rules for their government and for their proceedings. They shall be known collectively 88 "Railroad Commissioners of Texas," and shall have a seal, a star of five points, with the words "Railroad Commission of Texas" engraved thereon. They shall be furnished with an office in the capitol at Austin, and with necessary furniture, stationery, supplies, and all necessary expenses, to be paid for on the order of the governor. The commissioners,secretary, and clerks shall be entitled to receive from the state their actual traveling expenses, which shall include the cost only of transportation while traveling on the business of the oommission, to be, paid out on the order of the governor upon an itemized statement thereof, sworn to by the party who incurred the expense and approved by the commission. (It) Said commissioners may hold sessions at any place in this state, when deemed necessary to facilitate the discharge of their duties. Seo. 3. The power and authority is hereby vested in the railroad commission of Texas, and it is hereby made its duty, to adopt all necessary rates charges, and regulations to govern and regulate railroad freight and passenger tariftlfl. the power to oor· rect abuses and prevent unjust discrimination and extortion in the rates of freight and passenger tariffs on the different railroads in this state, and to enforce the same by having the penalties infiioted 88 by this act prescribed, through proper courts having jurisdiction. (a) The said commission shall have power, and it shall be its duty, to fairly and justly classify and subdivide all freight and property, of whatsoev:er character, that may be transported over the railroads of this state, into such general and special olasses or l3ubdivisions as may be found necessary and expedient. (b) The commission shall have power, and it shall be its duty, to fit to each class or subdivision of freight a reasonable rate for each railroad subject to this aot, for the transportation of each of said classes and subdivisions. (c)· The classifications herein provided for shall apply to and be the same for all railroads subject to the provisions of this act. (d) The said commission may fix different rates for different railroads, and for different lines under the same management, or for different parts of the same lines, if found necessary to do justice, and may make rates for express companies different from the rates fixed for railroads. (e) The said commission shall have power, and it shall be its duty, to fix and establish, for all or any connecting lines of railroad in this state, reasonable joint rates of freight charges for the various classes of freigh1. and cars that may pass over two or more lines of such railroads. (f) If any two or more connecting railroads shall fail to agoree upon a fair and just division of the charges arising froIil the transportation of freights, passengers, or cars

v.51F.no.9-35

over their liileSjitDe l Commission shall fix tHe prro rata part of suchcbarges to be re, . " ",."; " , c,eived by· each of said conneCting Hiles. . , ' , (q) make. theclusifications, and, schedulea of· rates as herein if,they 'deem it advisable,.they,may!make partial or·special olaaslBe"l4Ons110r:all or .any. of tile' railroads 8ubjectbereto,and ,fix, the rates tobeeharg.edbY'l'IUch 110adS' the.ret0r,and, s)Wh classifications and" rates, sball. be 'put intoeffect1n the m&u'ner,pl'OvidEid for,generalolassifications and schedules of rates. " (h)Tne: commisBieD! shall" hM'e power,alid :ibshall be its duty,' from time to time, to lUter, change, amendi or':abolish anyiclassitl.cation or rate established by it wben. deemed neces$Qlly'r!tllll:d ,such :amended, altered; 'or new cllissificatilllns or rates, shall be: put into effeotinif.&6'llQme mannel·lI.ll the origlna.l8.' . , (f,) The oommillBton·itIlayadopt and enforce such rules,regulatioas"and modes of procedure as it mayl deem-proper ·to hear. and. determine .complaJ,ntslthatmay be made' against the. classifications or the rates, the rules, regulations, and, determinations of,
"f'(I:7n(f"

"(}) Thecllllfmi9sion r Mlt:'inake reasonablll :and just rate8'of charges for each rail"" s road subject·neretofort.he'1use or transportation <Jf' loaded or empt:llf'tle.rs on its road; and may eltablish'foteBdhcirailroad, or for ,all railroads alike" reasonable rates for the storittill and forth,El'1Ue of cars not unloaded ,after forty-eight houni1'nottce; tb .tbe 'consignee, not to include Sundays. , ' ,,' " (k)Thetoommission shall make and,establish reasonable rate8 fOIl'the tl1ansportation of,piassarigers: over each or. all of the railroads subject 'hereto,which rates shall not ex-r ceed the rates fixed by law. The commission shall have power to presoribe reasonable pates,tolls, or"ellarge_'lIIorall'otber services performed by any railroad. subject hereto. (L) It shall be the duty of eaehandevery subject-to this act to prOVide andt mai.ntain adequat'e, cbmfot'tabll!, cleandepot:s and depot buildings at its several stati:omdor' thel,"comtrioda,tion: of,passengen, 'and said depot huildingsshall be kept well: lightedahd,Wllrmed::fortheeomforta:nd''8coommodation of. the traveling public; and· aU such roads' shall .keep and maintainadeguate and suitable' f.reight depots and build.; ings for the h.andling,'storin§, :atidi delivering of all freight handled by such 1'Oads: 'pl'O'Vided, that thissllsU 'not be c'Onstrued lI.ll repealing any eXisting laws on the sUbject. . .: ,I,' 'C' ,,' ' . ' " Sec. 4,', Before a1'1yrllites' shall be establisheduhder tbis 'act, ,the commission shall give the railroad compal1y·tO'be'8ffectedthereby ten days' notice of the time and place wb..nand:where the rate8,she.U be fixed,aM.said railroad company Rhall be entitled tol\!ehe&rdatsuch tin1Q aDd plaCe; to the eoothat justice may bedoDt" and it shall J!l>Qi",e process to enforce the attendanceof'Witnesses. All process herein provided fOt'llhallbeservedll.llinci'viNlases., , . " .:, ' The commisSion shalli'ha",e power to adopt rules to go.vel'n its proceedings, and, mode ana·manll.61' of' aU invEistfgations and hearings of railroad com" pMN:es and' other parties before it i'l'lthe' establisamsllt of rates, orders, and other acts required of it under this law. plloViding no 'pehiondesi.riIig to be present at any such in"elJtigia;tions :by -said .oCommlgllion sbaUbeilellied admission., ' (b) Thecbairman and each of tbe commissioners, for the purposes mentioned in this act, shall hltV6lJ'oWer to'ad;n1iniswr- all oaths, certify to all official acts, and to compel tbe attendance of witnesses and the production of papers! waybills, books, accounts, documents, and testimony:'o.nd topunishfor-contemptas.mlly as is provided by law flfr the district' or countv court; " '." : . ' " . 'Sec. 5. In all actionsuetweenprivate parties and railway companies brought under this law, the rates,charg.es\ orders,1'8gQ'latiotls; and classifications presoribed by said oommi&sion beforethltiJnstitutrol1'of suoh, action shall be held conolusive,anddeemed 811d 'accepted to be tell.llolulb1e,.'fa'ir, and· jllst;tlm:din' such respects sball not be controverted therein until finally found otherwise in a direct action brought for that pur. pO$e in the manner presorioodiby! sections llcaUd,7.'tbereof, 'l:lec-'6. If any railroad or"other party ut'interell.t)'be dissatisfied with the decision of. any rate, classification;' rule; charge, order,act;: or regulation adopted by the commission, such dissatisfied party:,maY'file a petition setting forth the particulal' cause orcaU8es ofoJjjeotiontolluch deCisi'on" aut,. rule, oharge, classification, or order, or to either or all'of them, in' a court of competentjurisdiution in Travis county, Tex., against said commission as defendant., Saidaotion shall have precedence over all otl!Iercauses. on.. the -docket 'Of '(j.Hterent' nature, Bnd, ahal1" be tried and determined as other civil causes in said court. Either party to saldaetion 'may appeal to theappel. laU! courthavingjririsdiction of 'MIid oause; aud said appeal shall be at once returnable 110 said; appellate' court 'at. either Of'itstllrms, and said action so appealed shall have precedence in said'appelllilt61court of all causes of a different character therein pendlUg: provided that, if the court be in session at the time such right of action accrues, tb&.:611it may: be. flleli dul'ing'·such teMl1;>and stand ready for trial af.ter ten days' notioe..' .. " !:1.'H: ': ' , Sec. 7. In all trialsunder,tbe'foregoing-se6tion, the burden of proof shall rest upon the plaintiff, who must show by clear and satisfactory evidence that tbe rates, regUlations, orders, classifications, acts, or chai'gaillomplained of· are unreasonable and unjust to it or, them. " 'Ii
<

'Ii.

:,('!,

I

.'.:.

,f, ,',.-.

'

.

MERCANTIDE' TBlDS;r

co.

V; TEXAS .;,Ji. 'lPt RY. CO.

5:4:7.

Sec: 8. Tbe sll.ldcommlsslonsbaU,so soon as the classifications and schedules "Of rates herein'provided for are prepared by them,furnlsh each railroad, 8'Ubject 'to the provisions of this IWt, with a complete schedule in suitable form, showing the classification of freight made by them, and the rates fixed by said commission to be byauchroad for the transportation of each clalla of freight, andsball cause 'aI oertlfied! copy of snch classification and, schedule' of rates to be delivered to each 'of said .rail.. roads at its principal office in this state; if it' hal;! such offiee: ill this stata,'and,' it; riot" thellto any agent of saidoompanyin this 'state, whiClh said schedUle, ruleli,'anli regulations shall take effect at the ,date wbich may be :fixed by said commission, not less :than twenty days. Each of said railroad companies' shall'cause Ilaidschedulas to'be printed in type' of a size not less than pica. and shall have thc"same i posted 'up ina conspicuous place at each of its depots, so as to be inspected by thepuhlic. Said commission may at any time abollsh,alter, or in any manner amend the Raid schedules, or abolish or amend any such regulations; and in that event certified copies of the schedules, rul13s, or regulations, ,shOWing the changes therein, shall be delivered to eaohrroadas berein speoified·. In all cases wbetethe rates shall not have ,been fixed by tbe 'commission, no changes shall be made except after ten days' notice to and eonsent of the comm ission. ' , rr 'See.l).:Any person, firm, corporation, or assooiation, or any mercantile, :agrlcill" tural, or manufacturing association, or any body politic, or municipal organization, complainin'l: of anytbing done,or omitted to be done b'l,any railroad subjeot hereto, in violation of any law of this stat<> or the provisions 0 this act, (for wbich penalty is provided,) may apply to said commission in suoh maDner and under sucb rules as the commission may prescribe; wbereupon. If tbere shall appear to the commission 'to pe ally,reasonable grounds for investigating such complaint, it shall give at least five days' notice to such railroad of sucb charge and complaint, and cal1 upon said road to answer 'the same at a time and place to be specified by the commission. The commis-. sion sball investigate and determine such complaint under sucb' rules and: mo les of procedure as it may adopt. I! the commission find tbat there ,has been a violation, it shall determine if tbe same was willfUl; If it finds that sucb violation was not willful, it may oall upon said road to satisfy the damage done to the complainant thereby, stating the amount of such damage, and to'pay tbe cost of sucb investigation; and if the saidl'ailroad shall do so within the time speoified by tbe commission, there shall be no prosecution by the state; but if said railroad shall not pay said damage and cost within tbe time speoified by said commission, or if tbe commission :find suoh violation to be willful, It shall institute pl:'oceedings to recover tbe penalty for such violation and the cost of such investigation. All sucb complaints shall be made in the name of tbe state of Texas upon :the relation of sucb complainant. All evidence taken before said commissi()n in tbe investigation of any suob complaint, when reduced to writing and signed and sworn to by the witness, may be used by either partY,-the state, complainant, or the railroad company,-in any proceeding against such railroad involving the same subject-m'atter: provided, furtber, that the commissioners may requiretbe testimony so taken before tbem to be reduced to writing wben they may deem it necessary, or when requested to do so by either party to sucb proceedings, and a certified copy under the band and,seal of said commission shall be admissible in evidence upon tbe trial of any cause or prooeeding growing out of tbe same transaC'" tion against such railroad. involVing the same subjeot-matter and between tbe same parties. The provisions of tbis section shall not abridge nor affect the right of any person to sue for any penalty tbat may be due him under tbe provisions of this act or any otber law of this state. ' Sec. 10. The oommissioners, or either of them, or such persons as tbey empioy therefor, shal1 have the rigbt, at sucb times as they may deem necessary. to inspect the books and papers, of any railroad company, and to examine under oath any oftloer, agent, or employe of such railroad in relation to the business and affairs of the same. I! any railroad shall refuse to permit tbe commissioners, or either of them, or any person authorized 'tbereto, to examine its books and papers, such railroad company shall, for each offense, pay to the state of Texas not less than $125 nor more than $500 for eacb day it sball S() fail or refuse: provided, that any person, other than one of said commissioners, who shall make any sucb demands, sball produce his authority, under the hand and seal of said commissi()n, to make such inspection. (a) Any officer, agent, or employe of any railroad company who shall, upon proper demand, fail or refuse to exhibit to the commissioners, or either of them, or any person authorized to investigate tbe same, any book or paper of such railroad company which is in tbe possession or under the control of such officer, agent, or employe, shall be deemed guilty of a· misdemeanor, and' upon conviction in any court bavlng jurisdietion thereof shall be :fined for each offense a sum not less than $120, and not [to] exceed $500. Sec. 11. The commission sball ascertain as early as nracticab1e the amount 01 money expended in construction and equipment per mile of every railway in Texas; the amount of money expended to procure the right of way, and the amount of money it wonld require to reconstruct the' roadbed, track, depots, and transportation, and to 1'&0 place all the physioal properties bel()nging to the railroad. It shall also ascertain the

548

DDERAL REPORTER,

vol. 51.

outstanding bonds, debentures, and indebtedness, and the amount, respectively, thereof;wlien issued, and rate of interest; .when due; for what purposes issued; how usediOO whQmissuedi to whom sold, and the price in cash, property, or labor, if any, I'6ceived therefor; ,what became of the proceeds; by whom the indebteq.ness is held; the amouut purporting ,to be due thereon jthefioating indebtedness of the company; 00 whom dtle".aIlQ his address; the credits due on it; the property on hand belonging 00 the railroad 'company i and the judicialor other sales of said road, its property or franchise;'and,.th&,alllountspurporting toihave been paid, and in what manner paid therefor·.The commission shall also ascertain the amounts paid for salaries to the officers of, the railroad and the wag-es paid its. employes. For the purpose in this section.:-named the commission may· employ sworn experts to inspect and assist them when needed, and from time to time, as the information required by this section is obtained, it shall communicate the same'to.the attorney general by re.port, and file a duplicate thereof with the comptroller for public use, and said information shall be printed fl'om time to time in the annual report of. the commission. 8eC.12.' The said commission shall cause to be prepared suitable blanks, with questions oalculated to elicit all information concerning railroads, and as often as it may be necessary furnish blanks to each railroad company. Any railroad company receiving from the commission aay such blanks shall cause said. blanks to be properly filled out, so as to answer fully and correctly eooh question therein propounded, and, in case they are unable to answer anyqu6stion, they shall give a satisfactory reas.on for theil' failure; and the said answers; Quly sworn'to by the proper officer of said company. shall be returned to said oommission at its office in the city of Austin within thirty days from the receipt thereof·. (a) If any officer, or employe of a railroad company shall fail or refuse to answer any questions therein propounded, or give a false answer to any such question where the fact inQuired of is within his knowledge, or shall evade the answel' to any such questions, such person 'shall be guilty of a misdemeanor, and shall on conviction thereof be fined for each day he shall fail ,to perform such duty after the expiration of the time aforesaid a penalty of $500, ·and the commission shall cause a prosecution therefor in the proper court i and a penalty of a like amount shall be recovered from the company wben it appears that such person acted in obedience to its direction, permission, or request in his failure, evasion, or refusal. Said commission shall have tbe power to prescribe a system of bookkeeping to be observed by all railroads subject hereto, under the penalties prescribed in this section. , ' :Eb) The said commissiol). sball make and submit to the governor annual reports containing a full and complete aecountof·tbe transactions of their office, together with the informationgatbered by sUCh·cornD;lission as herein required, and such other facts, suggestions, and recommendations as may 1;>e by theD;l deemed necessary, which report shall be pUblished as the reports of tbe heads of departments. (c) 'l'he said commission have power, and it is hereby made its duty, to investigate. all through. freight rates. on railroads in 3.'exas i and when the same are, in the opinion of the (loJ;nmission, eXQessive, or levied or laid in violation of the interstate commerce law, o.r'the rules ,and.regullJ,tions of tbe interstate. commerce commission, the officials of tbe railroads are to be notified of thefactEi and requested to reduce them, or make tbe proper corrections, astbe case may be. When the rates are not changed, or the proper corrections al'e not made according to the request of tbe commission, the latter is instructed to notify the interstate. commerce commission, and to apply to it for relief. Sec. 13. The said commission, in making any examination ,01' investigation prOVided in this act, shallbave power to issue subpoonasfor the attendance of witnesses by such rules as tbey may prescribe.· Each witness who shall appear before tbe commission by.order of tbe commission, at a ,place outside of the county of his residence, shall receive for his attendance $1 pet dlilY and 3 cents per mile, traveled by tbe nearest practicable route, in 'going to and returning from the place of meeting of said commission, which shall be olldered paid by the comptl'oller of public accounts upon tbe presenta,tion of proper voucbers, sworl). to by such witness, and approved by the chairmau of thecommissiouLprovided, that no witness shall be entitled to any witness fees or mileage who is dtrectly or indirectly interested in any railroad in this state or out ,of it, or who is in any wise interested in any stock, bond, mortgage, security, or earnings of any such road, or, who shall be the agent, or employe of such road, or an officer thereof, when summoned at the instance of such railroad; and no witness furnished with free transportation shall receive pay for the. distance he may have traveled on such free transportation. In case any witness shall fail or refuse to obey such subpmna, said commission may issue an attacbmentfor said witness, direoted to any sheriff or any constable of the state of Texas, and compel him to attend before the commission and !V.ve his testimony upon such matters as sball be lawfUlly required by them. If a witness, after being duly . 8ummoned, shall fail or refuse to attend or to answer any question propounded to him, and wbich he would be reqUired to answer if in court, the commission shall bave' the :power to fine and imprison sucb witness for contempt, in the same manner that a judge of the district cout't might do under similar .circumstances. The claim that any such testimony may tend to criminate the person giving it

MERCANTILE TRUST CO.

v.

TEXAS " P. BY. QO.

549

shall not excuse such witness from testifying, but such evidence or testimony shall not be used against such person on the trial of any criminal proceeding: proVided, the commission shall in all cases have the right, In Its discretion, to issue proper process and take depositions instead of personal attendance of witnesses. The sheriff or constable executing any process issued under the provisions of this section, or under any other provisions of this bill, shall receive such compensation as may be allowed by the commission, not to exceed fees as now prescribed by law for similar services. Bee. 14. If any railroad company subject to this act, or its agent or officer, shall hereafter charge, collect, demand, or receive from any person, company, firm, or corporation a greater rate, charge, or compensation than that fixed and established by the railroad commission for the transportation of freight, passengers, or cars, or for the useQf any car on the line of its railroad, or any line operated by it, or for receiving, forw'ardiIig, handling, or storing any such freight or cars, or for any other service performed or to be performed by it, such railroad company, and its said agent and officer, 8hall be deemed guilty of extortion, and 8hall forfeit and pay to the state of Texas a sum not les8 than $100 nor more than 15,000. Bec, 15. If any railroad SUbject hereto, directly or indirectly, or by any special rate, rebate, drawback, or other device, shall charge, demand, collect, or receive from any person, firm, or corporation a greater or less compensation for any service rendered or to be rendered by it than it charges, demands, collects, or receives from any other person, firm, or corporn,tion for doing a like and contemporaneous service, such railroad shall be deemed guilty of unjust discrimination, which is hereby prohibited. (n) It shall also be an unjust discrimination' for any such railroad to make or gin' llny undue or unreasonable preference or advantage to any particular person, company, firm, corporation. or locality, or to SUbject any particular description of traffic to any undue or unreasonable prejudice, delay, or disadvantage, in any respect whatsoever. (b) Evcry railroad company which shall fail or refuse, under such regulations as may be prescribed by the commission, to receive and transport, without delay or dis, crimination,' the passengers, tonnage, and cars, loaded or empty, of any connecting line of railroad, and every railroad wr.ich shall, under such regulations as may be prescribed by the commission, fail and refuse to transport and deliver, without delay or discrimination, any passengers,tonnage, or carsJ loaded or empty, 'destined to any, point on or over the line of any connecting line or railroad, shall be deemed guilty of unjust discrimination: provided, perishable freights of all kinds and live stock shall lIave precedent of shipment. (e) It shall also be an unjust discrimination for any railroad subject hereto to charge or receive any greater compensation in the aggregate for the transportation of like kind of property or passengers for a shorter than for a longer distance over the same line: provided, that upon application to the commission any railroad may in speCial ( ases, to prevent manifest injury, be authorized by the commission to charge less for longer than for shorter distances for transporting persons and property, and the commission shall from time to time prescribe the extent to which such railroad may be relieved from the operations of this provision: prOVided, that no manifest injustice shall be imposed upon any c,itizen at intermediate points: provided, further, that nothing herein shall be so construed as to prevent the commission from making what are known as "group rates" on any line or lines of railroad in this state.' . (d) Any railroad Violating any provision of this section shall be deemed gnilty of unjust discrimination, and shall for each offense pay to the state of Texas a penalty of not less than five hundred dollars, nor more than live thousand dollars. (h) Nothing herein shall prevent the carriage, storage, or handling of freight free or at rates for the state, or for any city, county, or town, government, or for charitable purposes, or to and from fairs and expositions for exhibition thereof, or the free carriage of destitute and indigent persons, or the issuance of mileage or excursion passenger tickets; nor to prevent railroads from giving free transportation to ministers of religion, or free transportation to the inmates of hospitals, eleemosynary and charitable institutions, and to the employes of, the agricultural and geological departments of this state, or to peace officers of this state; and nothing herein shall be construed to prevent railroads from giving free transportation to any railroad officers, agents, employes, attorneys, stockholders, or directors, or to the railroad commissioners, their secretary, clerks, and employes, herein provided for, or to any person not prohibited by law: provided, they, or either of them, shall not receive from the state mileage when snch pass is used. Sec. 16. Anyofficel' or agent of any railroad subject to this act who, by means of false billing, false classification, false weight, or by any other device, shall sufter or permit any person or persons to obtain transportation for property at less than the regular rates then in force on such railroad, or who, by means of false billing, false classification. false weighing,or by any device whatever, shall charge any person, firm, or corporation more for the transportation 0,f property than the regular rates, shall be guilty of a misdemeanor, and on conviction thereof tined in a sum of not less than $100 nor more than $1,000. Sec. 17. In case any railroad subject to this act shall do, cause to be done, or permit to be done, any matter, act, or thing in this act prohibited or declared to be unlawful,'

Ol.apl!M.gmi.j;W anY,.M1i"Iqo.tter"or tb.ing' b.!lreia required to be done,by it, such rail, . &·:t.'.I'1. ",q,.IJ.. 1:i.&, I,'IDed t..he,. p .. p-.,0.1' p.e.rsoll.,s,;:\ir.,m. or. c.orpo. In..n, :i.n.j)).1'·00.,.'.railroad come. !! to.. 10 cQnsljlllli\ence of SUch.vlOlatlon; and case sau:i t. ... .. . . for . '._.Y II ." 'liP. il. of. t,Qi;.tton.,o,",. i. a l!. by this ac.t defl.n.ed,. . .. .addi. ages, such.1iN1rOJiHishali ,pjlrson, firm, or tile, ll:.f ngt le,s\lJ,h&i;I$l,2P .,tha.n $500, tg R()urt n;r"dlCtlOD, me o(el>. provld ,tho. sUch road may plead and prove as a defense to the actIOn for salgpenaLty.. t. b.a.t".. Ulilh. ()vercharge w. .. tent.ion. innoc!3ntJ,y 1I!1ld tb.roug;b. amist.a.ke . of fACt: prbvl4ed,tb.at any su,cb.tecoveryasherelO proVided sh&l1l0 no manj1eraJ'fect 0. state of provld,ed for l\1,1cl1 violation. .,' " .. l:t"nf' Willfully violateany;pther prOviSions of thi!!!¥''.to. ,ore. alial ..dO. any. othe.1', Be t, ber e.in ... . .. '. ... . i,ted, o.r Shall.. fltil. o'!'.retu.se toper.fOl.'m any IUor ,which a pen&lty bas nOt hereinbe,llR proVided, for eVel1Y, s."l;!:l: l!:'i.t of VlOlatlO.nit>. S.hll,l.lpaythe. sta. 'Texas ll.penaLty,of not more th,ll.n five ,.,' , 'i, " , : Seo. 19. All of the penalties lterein provtde4, Elxcept as provided in,seotion 17, s,hall be be brougbt,in the name ,of the stll.te of Texas, in theproperi'pu.d in Trll.vis couuty, or in any county to or throughwhioh,jI]1ch rallroad'zri.a.Y run,br t.he attorney general or under his direction; and the attol'ney,bringingsuqb ,8uit shal receive a fee of fifty dollars for ea.ch penalty recovered' and !lOllected by:p.iIl/.,and ten Per cent, of the amoullt@llected, to be pll.id by the stll.te., In Illlsuitsarhiingpnder thil! ll9t, the rules of evid,ence,shall:be the sll.me as inordilla.ry civil,aotions, except as otherWise he.\'ein provided. All fines and penal. .aid into the tr.ea.suryof the state. tiesre. the s.t.ate nn.derth.ls act sball. be. p Seo. 20; U'pon applicll.tion Of any person, the COIZlmission shll.ll furnish certified copies of any regulations, or orders, and sucb certified copies, or printed,copieapp.bUshed byautpority of the com1I!il!sion, shall be admissible in evi. dence in any ,alid sufficient toestll.blish the fll.ot .that ll.ny charge, rate, rule, order, or classificat,ipn contl;lilled, and which mll.Y be in issue in the trill.I, is the official act oOIl;lml¥illn,4substa11;tialoomplill.ncewith the requirements of this act shall be llUlncililll,t ·j;Qg!.v,e ettect1iO aUtbeclassUICll.tions, rates, charges, rules. regUlations, lillltablished by the commission, and none of them shall be fora11.y omission of a technical matter in the performance of such act.. " ', ... ' .. , ' Sec. 21. It is 'hereby made the duty of such rll.ilroll.d commisl!ion to see that the previsions of tbisaQt,and .alllawa,of.. this state ooncel'ning railroads, are enforced and oheyecl, and that vi()ll/<t1ons and penll.lties due the state tberefor recovere4: and collected, And Sald commiSSIOn shall report all such violll.tions,with .thefacts,in their possession, to the attorney general or other officer charged wj.tb tlle enf.orPlilme.at of tbe laws, and. . im to institute the properproceedings; and aU suits between the state and ll.ny railroad shll.ll have precedence in all courts over all otllersuitl. pending therein. (a) It .shall,be the duty of the cpmmission to investigll.te all complaints ll.gai:lst railro!W. comJ;anies subject hereto,and to enforce 1l111aws of this state in reference to raLlroads. ,But any two connecting railroads may enter into a contract whereby any part or all of the,p.aBsengers, freight, or cars, empty or loaded, hauled or transported by one,and destined to points on or bel'ond the line of the other, shll.ll be delivered to, received and trll.nspOl,'ted by, the: otller; wllicll contract, however, shall be submitted to the rll.ilroad cc;un!Jllssion forexaminll.tional\cl,approval, and when so approved by the cO,mmission the ,shall be bindiI\g; Put,.if the sll.id contract be not approved by t<he commission,'tlle same shall be void: pl"o,vid,ed, thll.t any connecting line delivering frei .... ,ght to the owne.ror. of such freight may be sue.d by the owner thereof in the county where'thefreightis Ilelivered, for dll.mage that may be done to suoh frelghtin its transportation. .' " .. ' 22. The terms <l1'oad, ,.., ralh'pad, " <lraill'Oad companies,:" and" railroad corporations, "as used ,hereio.. be taken 1'>0 IZlean and embrace all corporations, companies, tbeir lessees or receivers, appointed by indiViduals, and a!llooiations ,of any court whatl!0llyerthat may l!PW or bllreafter own, operate, manll.ge, or control any railroad or part pfaraill'oad in .tbis stll.t!l, and ll.1l such corporll.tions, companies, or receivers, as shall do the business of and assooiations of .individuals, common carriers Oil anY railroad intbiestate, (Ii) The provisions of this act shll.ll be construed to ll.pply to and affect only the transPQrtation of passenge).'!!, freight,ao.d' cars Qetween points within this state; and this . P.P.·lY1iO street.rll.i.1WaY.S,;iQPrSUbUrban or belt lines of rll.ilways, in or near and towns. .' . ". .:' ' o,} It shall b¢tQ.1l duty of the oommilsioli to see that upon every railroad and branch of same cll.rrylng ,passengers for hire in ,tbis, state shall run at lell.st one train a oay, (SJlndays exoepted,) upon which passengers shall be hauled, and the commission shall have no power to relax this provision. Sec. 23. This aot shall not hll.ve the effect to relell.se or waive any right of action by the state, or lJAy..personforll.ny right, penalty, or forfeiture which may have arisen, or und.er any 1110W oj this state;' and all penalties accruing under
o

.· fi:\lP:6 m

J '."

. PYENl'Tt1. POWELL.

551

shall becumulat\ve of.each ,otb,er, and a suit.1'l)r.or·rElcovery: of 'one shall npl be.S: bar to tbe recovery of ,any other penalty; and all laws of laws .in conflict With this act are hereby repealeq. ' : :. :. . : ' ; I ' .,' . . . . .Sec. 24. The fact that there iSlla and laws for the regula,tion of railroads in the transportation of frelg:ht and passenger traffic, and the. nearapproacb of the olose of the presentsession,creat8llan imperative pUblic necessity and an emerthe suspensIo.n, of the constitutional rule requiring to be read on three several days, and it is 80 suspended, and that this act ,take effect 8!ld be in force from:and after its it is so enacted. . .. .

PYEATT

et al. v.

PQWEti..

of Appeals, E'lghth

No. lOll. 1. Sl1l!fS'Pi

July 25, l892.)

TEnRJTORy.....OC\MMoN·LAwToGovER:'If,-LEX FORI. . In, a<itions in the ft;:deral courts in the Indian Territory, the, rule of decision, in the absence of statute, or of proof of the laws, rules, or customs 'prevailing in the territ0ry, is the common law,sillceit is the texjori.

2·.CIlATTEL MORTGAGES-REGISTRy LAWS-INDIAN TERRITORY. The registry law of Kansas does not 'apply to a chattel mortgage executed in Kansas by a resident of the Indian Territory upon property situated in the territory.
8.

At common law an unrecorded chattel mortgage, unaccompanied with possession of thecllattels mortgllged, is· plimn jncie fraudUlent and .void as . til pf the mort!!'agor; but this presumption 01' fraud may be rebutted, and, where it is adrnittedor proved that such a mortgage is not fraudulent asto creditors, the mortgage may be sustained, notwithstanding tlle possession il:! the mortgagor.
SAME-VESTING OF TI1'LE.

AT COMMON LAW.,

4.

. At common law a chattel mortgage vests the title conditionally in the mortgagee, which title, in 'Jase of default, becomes absolute; and therefore a mortgagee of domestic animals is en titled, after defahlt, to the increase thereof.

.

5.

SAl!4E-ATTACHMENT-IN$TRUCTIONS.

In un 'action by the mortgagee iti such case to recover the property from creditors who attached it after default, defendants were not prejUdiced by a charge that plaintiff was entitled to recover if defendants had knowledge of the mortgage before bringing their suit, for the right to recover was complete, whetuer defendants bad such knowledge or not. In such an action it was competent for plaintiff to recover under the mortgage upon general allegations of title and right to immediate possession.

6. SAME-PLEADING.

In Error to the States Court in the Indian Territory. Action of repleVin by Warren C. Powell against Henry C. Pyeatt and James C. Kirby. Verdict and judgment for plaintiff. Defendants bring error. Affirmed. , Statement by SANBORN, Circuit Judge: The defendant in error brought an action of replevin for certain mares and colts ofthevaliIe of about $4,000, in the United States Court in the Indian Territory, against the marshal, who had seized them on Octobel' 4, 1889, under an execution issued out of that court upon a judgment favor of the plainfitls in error, and against William P.McClellan, for 87,598.07. Plaintiff in his complaint alleged that be was the owner and entitled to the immediate possession of the animals, and' plaintiffs

in

552

FEDERAL REPORTER,

vo}; 51.

""howere by ordel' of the court substituted for the marshal as defendantS, in their answer denied the plaintiff's allegations. On the trial established by undisputed evidence that on July 18, 1888, was justly indebted to the plaintiff in the sum of that on that. day at Coffeeville, in the state of Kansas, he 'gave the plaintiff his, two promissory notes for this aggregate amount, payable in a year, and good faith made and delivered to him his chattel mortgage on the mares and colts that were then in being to secure these notes; that the mortgage provided that the mortgagor should retain possession of the property until default, and upon payment of the notes it should be void; that McClellan resided in the InJian Territory, and the mortgaged 'property at the date of the mortgage was, and continued to remain, in that territory; that nothing was ever paid on this debt before the levy was made on October 4, 1889, in any other way than by the ()f the property itself by the mortgagee; and that the defendants had actual notice of the mortgage before they brought the suit, which in the judgment under which the levy was made on the property. There was evidence tending to show that in the spring or early suminer of 1889 McClellan delivered to the pll1-intiff possession of all the mortgaged .property under all agreement that either he or the plaintiff might sell it if possible, and apply the proceeds on the debt, and, if not sold before the notes fell due, plaintiffehould credit McClellan $4,500 on the notes for this pr.operty, but the bona fides of this transfer was denied. That question, and allOthel's within the issues, were submitted to the jury, and a rendered for the plaintiff, to reverse which this verdict and writ was sued out. A part of the colts in controversy were foaled by the mortgaged mares in the spring of 1889. John H. Rogl':/'$, for plaintiffs in error. W. M. Cravens and Geor,qe E. Nelson, for defendant in error. Before CALDWELL and SANBORN, Circuit Judges, and SHIRAS, District Judge. SANBORN,.Circ;mit Judge, after stating the facts as above, delivered the opinion of the court. ' , There are 43 assignments of errGr in elis case, but in the view taken by the court it will be necessary to consider but 3. The thirty-second assignment is that the court erred in refusing to charge the jury as follows: "The court instructs the jury that, under the law in force iiI the Indian Territory at the time of the execution of the mortgage introduced in evidence in this cause, and at the time of the levy of the execution of the defendants, Pyeatt and Kirby, the title and ownership of the mortgaged property remained until default. and after default until the mortgagor took in the open and visible possession of the propert.)' mortgaged. If, therefore, you believe from the evtdence that the mortgage did not expressly em brace the increase of the mares mortgaged, and that the mares remained after default in actual possession 'of the mortgagor, William P. McClellan, and so remained until the levy of the defendant's .execution, the colts foaled in the spring of

PYEATT V. POWELL.

553

1889 were liable to defendant·s execution, and especially is this true if, at the time of the default or levy, it was no longer necessary for the colts to follow their dams for nurture." There was no error in this refusal. Under the common law, whose rules must govern here, a mortgage of personal property vests the title in the mortgagee subject to be defeated upon compliance with its conditions, and upon a failure to comply therewith such title becomes absolute. Story, Bailm. § 287, and cases cited; Stewart v. Hanson, 35 Me. 506; Talbot v. De Forest, 3 G. Greene, 586; Flanders v. BarsWw,18 Me. 357. The brood of all tame or domestic animals belongs to the owner. of the dam or mother, and at common law the increase or young of mortgaged animals belongs to the mortgagee. Cattle Co. v. Mann, 130 U. S. 78, 9 Sup.. Ct. Rep. 458; Jones, Chat. Mortg. § 149; Cahoon v. Mier8; 67 Md. 573, 11 Atl. Rep. 278; Evans v. Merriken, 8 Gill. & J. 39. That each of the following instructions was given by the court below to the jury is also assigned as error: . "The court further instrncts the jury that the mortgage adduced and read in evidence by the plaintiff, Powell, contains a provision for the retention and possession of the mortgaged propl'rty by the mortgagor, McClellan, until the happening of some on'" of the events mentioned therein to cause a. fault; therefore the possessien of the property by the mortgagor is not Inconsistent with the terms of the mortgage, and the court pronounces the mortgage valid on its face, and binding between Powell and McClellan; and if the jury shall believe from the evidence that on the 18th day of July,18Sg, said McUlellan was justly indebted to said Powell in the sums of money for which said two notes which were read JD evidence were executed, and that said mortgage was given in go,!d faith to secure the payment of said notes, and if the jury shall also believe from the evidence that defendants Kirby and Pyeatt. had actual knowledge and Imewof said mortgage before the bringing of their suit and the obtaining of their judgment against the mortgagor, McClellan, in this court, then the mortgaged property should not be held Bubject to their execution. and the jury shonld find for the plaintiff. Powell. The court further instructs the jury that if yousball believe from the evidence that William P. McClellan. on the 18th day of Ju]y, 1888. was Justly indebted to the plaintiff, Warren C. Powell. in the sum of forty-nine hundred and thirty-six dollars and eleven cents, as evidpnced by the two promissory notes adduced and read in evidence on this trial, and that said McClellan executed the mortgage read to the jnry to secure the payment of said notes, and that defendants Kirby and Pyeatt had actual notice and knew of said mortgage before the bringing of their suit and obtaining thpir jUdgment against the mortgagor in this court, and the jury shall believe that said notes and mortgage were past due and unpaid before the issuance of the execution read in evidence, then the mortgaged property Was not suhject to said execution, and the jury should find for the plai ntiff, Powell." The contention is that these instructions wtJre erroneous on two grounds: First, because it was not competent for plaintiff to recover on this mortgage under his pleading; second, because it is claimed that this mortgage, which was executed in Kansas, was void as to the creditors of McClellan, because it was never filed as reqUired by the following provisions of the statutes of Kansas: "Every mortgage or conveyance intended to operate as a mortgage of personal property which shall not be accompanied by an immediate delivery, and

554
befoUql!«mrYY I:'.l\

v()l. 51.

lfjlllJI,

change,of'possessioJ,l of t,la,e j;J)i,l,lgs;mqrt" of, ,mqrtgfl89f'l'nd, as against subsequent purchasers and mortgagees in unless the mortgage. ,or a true copY,ther",of" shall be deposited in the office 'of the register of deeds in the where the property shall then be situated, or. if the mortgagor bea l'el'lldent of this state, then of tbecounty of which ,a reElWlent." GeD, St. Kan. 1889. §39Q:3. be shall As to, the first. ground, iti is ,sufficient to say that the, notes and gage were. introduced in evidence ,without objection, and, uncier the plaintifFs allegation of title :andright to the immediate possessiop of the mortgaged "property, they; were competent,evidence on which he had a right W:rely. 'Th.e prima.ry,question ,en trial was whether p1ll-intiff or defendants"were entitleci to the possession ,Qf the property, and this mortgage, if valid, and its past-due debt, 'if unpaid, established the plaintiff'scontemtion.. Per8(m, Wright,;35 Ark. 175; Story, Bailm. § 267; Winchester v. Ball, 54 Me. 558; Talbot v" De Forest, 3 G. Greene, 586. As to must be b01'Oe in mind that the owner of the property mortgaged l'esided, and the mortgaged property itself was intFle Indian Territory. In that territory there was no re?;istry the mortgage could be filed: Between statpte,.....;.noregister was, and binding in witQout filing and; without delivery of possession oLtheproperty"mortgllged. Dennyv. Fatl-Z1cner, 22lV.tn. 89; Ma1'tin v. Ogden,41,AlIk.191, 192; Hackettv. Manlove, 14 Cal. 85. As this mortand binding between the parties to it, it was so as to third was made void as to sottle third parties by some statQr,rgle. ., ,. ," : '/fheregistry Jl.pt of was in the nature of a police regulation of thl'tstate.lt was enacted to modify in that state the rl;11e of the common law which made every chattel mortgage of articles capable of manual ,dl!UverY,'!lnacedmpanied change of possession of the things mortas of, 'and bona fide putchasers from, to give tomortgs,g¢es by makiQg tlleir mortgages, .unaccoUlpa'l)i,ed ,with possessjon of. the property, valid when recorded, and by: thelsame record to, protect creditors and against secret trusts. It 'ne'Vel"lt1lil intended to have, and has not; any extraterritorial 'the rights <?fthe creditors of McClellan, seeking to acItldian Territory, were concerned, ,tbisregistrylaw of Kansas was without effect. The 11lortgage and these rights of creditors were by the lex domicilii. of the owner who r:n0J.'tgaged the propertyt a-qd by the lllw.or the place where the property JVll,lplitua,ted.,'l'hey were governed by the law of the, Indian Territory.

Tied. Sales, § 239; Jones, Chat. Mortg. §, 305, What, the law of the.IndlaIl Territory on this subject in 9£ congress of May 2,

83,9; 34.?;

76

v. Potter,34 Vt. 87;

:.:

l · . . '"

PYEATT V. POWELL.

("',

.':.,

555

1890, (26' U. S. St. p. 94.,) extendingoverthis territory certain statutes of the state of Arkansas, there was no statute in operation in this territory upon any subject outside of th,osetreated in the acts of the congress regulating intercourse with the Indians and punishing offenses against the United States. In the United States, in the absence of statutes, the presumption of the existence of the common law prevails in all the territory of the original colonies, and in all newly-acquired territory originally settled by Englishmen or their American descendants; but this presumption may not prevuilin the Indian 'l'erritory, because, before its purchase by the United States, it was part of a territory settled by the subjectsand governed by the laws of other nations. 'l'hereis, however, another well-settled principle, founded in reason and authority, upon which, in the federal courts, the common law must be helfl to govern the rights of these parties. It is that the lex fori, or, in other words, the Jaws of the country to whose courts the party appeals for rellress, furnish in all cases, prima facie, the rule of decision. Monroev. Dquglass, 5 N. Y. 452; The Scotland, 105 U. S. 24, 30, 31; Garner v. IVright, 52 Ark. 388;i Norris v. Harris, 15 Cal. 254. In the federal courts, in the absence of statutes repeal'ing or modifying it, the law is the rule of decision and guide of action; and when, by the act of March 1, 1889, (25 U.S. St. p.783,) the congress, with the assent of the Indians, created the court below for the Indian Territory, and conferred on it "jurisdiction in all civil cases between citizens of the United States who are residents of the Indian Territory, or between citizens of the United States, or orany state or territory, andariy citizen of or persons residing or found in the Indian Territory," when the amount ill that it gave that court authority, controversy was $100 or over, we and imposed upon it the duty, to apply the established rules and principles of the common Jaw to the adjudication of those cases of which it was thus given jurisdiction, where. as ill this mise, no proof is made of the laws, rules, or custorrisobtaining in that '1'he rule of the common law is that a mortgage of personal property, unaccompanied. with possession, is prirrut facie void as to creditors ofthe mortgagor; yet the presumption of arising from that circumstance may be rebutted by explanations showing the transaction to be fair and honest. and giving areasonable accountofthe retention of RynU v. RoUe, 1 Atk. 165,168; Altonv. Harri8on, L. R. 4 Ch. App.622, 626; Martindale v. Booth, 3 Bam. & AdoI. 498,506; Hauselt v. Harrison, 105 U. 8.401; Warnerv. Norton, 20 HtlW. 44.8,460; Martin v. Ogdel/, 4.1 Ark. 191, 192; 2 Kent, Comm. 521. Thus, in RyaU v. Rolle,l Atk. 167, (decided in 1749,) the court said: .. The next qupstion to be consirtel'pd will be in relation to the condition of creditors when the debtor continues in posspssion of the Koods mortguKed; This was fraudulent at common law, and 13 Eliz. c. 5, I, 2. provides agalUst it, that it shall be void. There is nu distinctiun whether tile sale be
112 B. W. Rep. 785.

5;56'.

FEDERAL REPORTER,

vol. 51.

<:onditional., of eqnity and juries are to, upon the evid,ence. whether the conveyance Was made witll a view to defraud or Dot.'" ' . . , ' .; . debt fel(dueJuly 1889, and, if the mortgagor had that date, behad no interest that was subject to levy and cpmmon law if the mortgage was valid. Jones, Mortg. § 556, note 4, and cases cited. The result is that this mortgage was not void beclluseit wl/-s not filed in the office Ofsome register ofdeeds, as required statute. Asidefrom the possession of the mortgaged property IX}ortgagor, which the mortgage by its terms provided for, there was no evidence at the trial. tending to show that it was not made ip g()pd (aith to secure a debt, or that it was made with any intent to d,ell}y, or OIl the oral argument in this court itwas expressly cl:mc'eded by counsel for defendants t1:1at there was noqtlestion .of the good faith of the parties to the mortgage, or as to the and in his brief he says: "Th,dre Is O<)t a scintilla pf eyidence in the that in July, 1888. McClell\in Powell the,amonnt of the notes secured by the mortgage read in evidence. were notgiv6n in good faith;". . 'ft' ihat\}nder evidence aqq these concessions there. was no ;the vahd,lty, of the debt, or thefralfdulent character of to be subinitted to the jury, and hence there q>uldijs,ve.beer:qlo pJ:ejriclicial error in tbE( instructions we have been considering.. A oh8:ttel mortgage, notfraridulent asta creditors, made in good faith, honest debt, is at common law superiorto a subsequellt attachtilent of the same property by a creditor of the mortgagor. . It is true that it was not material whether the defendants were or were not notified of this after their debt accrued, and, before they ..but the charge of the court that this mortgage entitled the plaintiff to recover, if.defendants were notified of it before suit, could do the defe,ndantllpo because, under the admissions as to its charentitled bim to recover whether the defendants were acter, the n()tified of it. or not. And for the. same reason nOlle of the other errors preju.dtced the defendants, for it is conceded that, we have been considering are, correct, the jury shol}ld ,ha.ve return' a verdict for the plaintiff, Error without no ground for reversal, and for this reason we have ()Onsidere,d. the asSignrnents of error not above discussed, and the jlld,gp1ent. is affirmed.

BRUSH ELECTRIC CO.". 1l:LJilCTRIC IMp. CO.

557

BRUSH ELECTRIC

CO. et atv.

ELEC'l'RIC IMP.

Co.

OF SAN JOSE.

(Circuit Court of Appeals, Ninth Circuit.
APPEALA.BLE ORDERS-FINA.LITY..

July 14, 1892.)

.·

The owner of a patent moved to be dismissed from a suit for infringement brought by a licensee on the ground that the suit had been brought without its authority. Hel,d, that, as the motion presented questions of law and fact not presented in the bill of compiaint, an order it was a "final decision, " within the meaning of the act of March 3,1891, and therefore the subject of an appeal.

Appeal from the Circuit Court of the United States for the Northern District of California. On motion to dismiss appool. Denied. Statement by KNOWLES, District Judge .. The California Electric Ligl!1t Company, and the San Jose Light & Power Company, desiring to commence a suit against the Electric Improvement COnlpany of San Jose, for an infringement of a certain patent, joined. vvith them' as a plaintiff the Brush ElectricOompany. After the bill of complaint had been filed in the circuit court for the district {)f Brush Ele(ltric Company came into said court, and moved that the said caUse be dismissed as to it. At the hearing of this motion affidavits were introduced by both the Brush Electric Company arid the California Electric Light Company bearing upon the question {)f the right of the California Electric Light Company to use the nanie of said BrUsh Electric Company in the said action. The question of, fact was considered and determined upon the affidavits. Important questions of law were presented and decided in the ruling of the court upon this motion. The court overruled the motion to dismiss. 49 Fed. Rep. 73. The Brush Electric Company appealed to this court from this order overruling its said motion. Edward P. Cole and H. P. Bowie,. for appellant. The motion of appellees to' dismiss our appeal is based on the ground that the order of January 18, refusing to dismiss the Bru8h Electric Company from the bill, is not appealable; that is, that the order is not a final or-del'. .

The facts are these: A bill was tiled in the circuit court to enjoin an infringement of a patent. The bill was entitled: "Brush Electric Company, ,California Electric Light Co., San Jose Light and Power Co., vs. The Electric Improvement Co. of· 8anJose." The Brush Electric Company, the owner of the patent, moved to be dismissed from the suit, becanse it was begun with.Qutits authority, and it had newer given any consent' to· any one to use its 'name in' this litigation, andit did not desire to press the Case. Its coplaintiff the California Electric Light Company objected, and affidavits were tiled sllowdng that the California Electric Light Company was the licensee of the Brush Electric Company, and the light and power compl\ny was its sublicensee, but without its consent, and that the California Electric Light Company had no interest in the case. Thecollrt refused to dismiss the Brush Electric Companyfroml 1;he suit, and deoided that the California Electric Light Company had the:right to the use of its name iothis suit, and that the Brush Electric .company should have no control over nor interest in thesliit. From this order an appeal has been t.aken. .