U.S. at the Rel. of St. Louis Sw. Ry. Co. v. Interstate Com. Comm'n, 264 U.S. 64 (1924)
Case details
Citation
264 U.S. 64
Full caption
UNITED STATES AT THE RELATION OF ST. LOUIS SOUTHWESTERN RAILWAY COMPANY v. INTERSTATE COMMERCE COMMISSION ET AL.
Country
United States
Jurisdiction
Federal
Court
Supreme Court of the United States
Decided
Feb. 18, 1924
UNITED STATES AT THE RELATION OF ST. LOUIS SOUTHWESTERN RAILWAY COMPANY v. INTERSTATE COMMERCE COMMISSION ET AL.
ERROR TO THE COURT OF APPEALS OF THE DISTRICT OF
COLUMBIA.
No. 398. Argued January 23, 24, 1924.—Decided February 18, 1924.
1. Congress may make one fact prima facie evidence of another if the inference is not so unreasonable as to be a purely arbitrary mandate. P. 77.
2. Under § 19a of the Act to Regulate Commerce, as amended, directing the Commission to investigate, ascertain and report the value of the properties of common carriers, and to hear -the protests of any carrier against a valuation tentatively made; declaring a final valuation prima facie evidence of the value of the carrier’s property in all proceedings under the act and in various judicial proceedings, and providing that, unless otherwise ordered by the Commission, its records and data shall be open to the inspection and examination of the public. Held:
(a) That an order of the Commission denying inspection of records by others than its employees, unless and until offered in evidence at hearings upon protests or before a court, was valid against an interested carrier in so far as the claim to examine them might be based upon the naked ground of their being public documents. P. 78.
(&) Subject to the right of the Commission to prevent undue interference with the work in its offices, and undue protraction of hearings, manifest justice requires that the carrier be enabled to examine and meet the data upon which preliminary valuation of its property is founded, and, to this end, be given such information in advance of the hearing as will enable it to point out errors. Id.
(c) This claim of the carrier should not be denied upon the ground of public policy, nor upon the ground that the evidence was given the Commission in confidence. Id.
(d) The carrier is not entitled to subpoenas from the Commission not presently needed. P. 79.
290 Fed. 264, affirmed.
Error to a judgment of the Court of Appeals of the District of Columbia, affirming a judgment of the Supreme Court of the District, which dismissed a petition for a mandamus against the Interstate Commerce Commission and some of its officials.
Mr. J. R. Turney, with whom Mr. C. D. Draytonwas on the brief, for plaintiff in error.
The Valuation Act did not empower the Commission to abrogate relator’s right, as a party litigant, to examine records and data in the possession of the Commission containing evidence material to the prosecution of relator’s protest.
The value reported in the tentative valuation is a mathematical calculation based upon three subordinate findings, (1) the so-called cost of reproducing the physical property, (2) the amount of depreciation in the physical property, and (3) the present value of relator’s lands. The reproduction cost is based entirely upon certain average unit prices obtained from statistical data gathered and compiled by the employees of the bureau. The amount of depreciation deducted was determined primarily by the service life of the several physical units also shown by the averages of data similarly gathered and compiled by the Commission’s employees. The present value of the lands of relator was determined by the assessment for tax purposes of certain other property in the vicinity, by the sales of like property in the vicinity and by the opinion of certain unnamed persons as to the value of lands lying in the vicinity of relator’s lands.
Assuming, but not conceding, that this is the correct method of valuing railroad property, the burden cast upon a protestant can be sustained only by showing that these underlying data are incorrect in one or more of the following particulars: (1) because the facts contained in the data are untrue; (2) because the projects from
97851°—24-------5
Argument for Plaintiff in Error. 264 U.S.
which the statistical data were compiled were unfairly selected or were inapplicable to the case in which the average is to be used; (3) because other and material relevant data which would have affected the result materially were either not considered or were excluded in making the compilation; and finally, (4) because the actual analyses and compilations of the data were incorrect mathematically, in theory, application or arithmetic.
The Commission states that the statistical data above described were gathered from nation-wide sources, embracing, not only all carriers, but innumerable manufacturers, etc. In order to make the foregoing tests of the accuracy and applicability of the facts stated in these data, it will be necessary to investigate the original records from these many sources. To ascertain whether the statistical data are complete it will be necessary to compare and analyze the compilations used by the Commission with the results of similar studies of other data made by the protestant. To test the experiential qualifications of the men upon whose opinion various facts are based, it will be necessary to investigate the education, mental habit, the environment and objective point of the person giving the facts, the motive prompting his opinion or his selection, as well as the extent of his information. With respect to the sales of land used as a basis for fixing the land values, it will be necessary to investigate whether or not the property sold was comparable with that of the property of the railroad; whether the sale was voluntary or made under duress or coercion; whether the consideration shown was in fact actually paid; whether the area reported was the correct area, and finally, what effect the inclusion of other sales omitted by the Commission would have had on the unit price. When these facts have been investigated, it will then be necessary to recompile and analyze the data to determine whether or not the analysis used by the Bureau’s employees was correct mathematically.
There is a fundamental difference between the evidence to which access is sought in this case and that which ordinarily forms a predicate of judicial action. The time required to make such examination and analysis means that unless the relator has the opportunity to examine the data in advance of the hearing, its right to contest the tentative valuation will be denied for all practical purposes.
The data sought consist of statistics and records gathered from a large number of different sources by means of questionnaires, circulars and personal interviews purporting to show the cost and values of railroad property. They were gathered, compiled and analyzed by officers of the Government at public expense in performance of a statutory duty and are now preserved in the Commission’s files as a permanent memorial of how that duty was performed. They are, therefore, public records, which a litigant has a right to examine. People v. Peck, 138 N. Y. 386; Coleman v. Commonwealth, 25 Gratt. 865; Robinson v. Fishback, 135 Ind. 132.
Under paragraph (j) of the valuation section the final value fixed by the Commission is made prima jade evidence of the value in all judicial proceedings, in which the data would be material evidence on behalf of the relator and to impeach this prima fade showing. It is not necessary in order for the right to examine a public record to arise, that the litigation be pending. The right exists if the data contain evidence material to the prosecution of a claim or a defense in a case which may arise. Citronelle v. Skinner, 60 Ala. 812; Ferry v. Williams, 41 N. J. L. 332; Ex parte Uppercu, 239 U. S. 435.
The discretion which the statute (par. e) gives the Commission to seal its records is limited to the general public, and does not refer to litigants or other persons who have the right of access to the evidence independent of the statute. See Palacios v. CorbettK*172 S. W. 777; Wellford v. Williams, 110 Tenn. 549; Colescot v. King*, 154 Ind. 621.
The Commission’s construction of the statute does not foreclose judicial action. Work v. McAlester-Edwards Co., 262 U. S. 200; Roberts v. United States, 176 U. S. 221; Lane v. Hoglund, 244 U. S. 174.
Denial of the right was in any event outside the discretion of the Commission, and arbitrary and void.
The statement that opening the records would be detrimental to the public interest, conveys no reason.
The statement that disclosure would make it impossible to secure reliable and uninfluenced opinions, means that justice will more likely be done in a proceeding in camera than it will in one in which the parties can hear and be heard. See Jackson v. Mobley, 157 Ala. 108; Re Egan, 205 N. Y. 147.
That it would prolong the work, increase the expense and interfere with performance of duties of the Commission’s employees, are reasons upon their face without legal force. The statute declares that the records shall be open to the public, except for good cause shown. The Commission has no more right to decline to perform a duty placed upon it by Congress, because the performance of the duty will require time and expense, than it has to decline to perform it upon the ground that it is impossible of performance, or that it would be futile to do so. Kansas City Southern Ry. Co. v. Interstate Commerce Comm., 252 U. S. 178.
The reasons which Congress had in mind that would warrant the sealing of the records were those which would apply to some particular case or some particular record, but not these which would apply to the opening of all records in all cases.
Since the statute relied upon by the defendants requires that the records shall be public, in the absence of an order based upon lawful reasons, an order sealing the records which does not meet this requirement is utterly null and void.
Mandamus is the proper remedy. Ex parte Bradley, 7 Wall. 364; Mauldin v. Matthews, 81 S. Car. 414; Kelleher v. School Board, 134 Mo. 296; Yeargin n . Maschke, 90 Wash. 249; California Pine Box Co. v. Superior Court, 13 Cal. App. 65.
Relator was entitled to a subpoena duces tecum requiring the production of the documentary evidence underlying the tentative valuation and, for the purpose of cross examination, the attendance of the employees of the Bureau of Valuation who gathered, compiled and analyzed such evidence. Omaha v. Omaha Water Co., 218 U. S. 180, distinguished.
The valuation proceeding is a quasi judicial one, and therefore, in accordance with the principles laid down in Interstate Commerce Comm. v. Louisville & Nashville R. R. Co., 227 U. S. 88, relator, as a party litigant, was entitled to be apprised as to all evidence considered. The Interstate Commerce Act expressly provides (§ 17) that “proceedings before it [the Commission] . . . shall conform as nearly as may be to those in use in courts of the United States.” Congress intended the Commission to administer § 19a of the act in precisely the same manner that it had administered others—by giving all parties, including its own employees, an opportunity to introduce evidence, and then deciding the issues upon the evidence thus introduced.
Any judgment reached by a court with respect to the value of a carrier’s property in a case involving the Act to Regulate Commerce must be entirely based upon the very evidence which the Commission considered in making the finding. How could the court make such a finding if there were no record of a substantial part of the evidence considered by the Commission, or, especially, if the Commission made its tentative finding without evidence? This paragraph (j) of the act of necessity restricts the Commission to a proceeding which determines p. 70value upon evidence which a court can consider, when under the act it becomes necessary for a court to pass upon that question.
That Congress intended that the valuation proceeding should be of a judicial nature is shown by the effect which it gives to the order of the Commission made as a result of the proceeding, not only in making such order prima fade evidence of the valuation of relator’s property in all proceedings (including judicial proceedings), but in authorizing the Commission to use the valuation and the data supporting it for determining (1) reasonable charges under paragraph 5, § 1; (2) amount of sale price and security issues upon the purchase by one carrier of the property of another under paragraph 6b, § 5; (3) reasonableness of aggregate level of rates of the country as a whole, paragraphs 2 and 4, § 15a; (4) amount of excess earnings to be recaptured from carriers under paragraph 6, § 15a; (5) amount and conditions of security issues by carriers under § 20a of the act.
A proceeding where one’s property rights may be taken through administrative action without anything more than a mock hearing in which he is neither apprised of the evidence considered nor given opportunity to introduce relevant evidence, would constitute a failure of due process under the Fifth Amendment. Bratton v. Chandler, 260 U. S. 110.
Paragraph (i) gives the carrier the right to a hearing, including the right to introduce evidence. Of what value is this right if the carrier be denied the right not only to show that evidence upon which the tentative valuation is based is false, but even to know what that evidence is?
No claim is made by the carrier to a right to a hearing prior to the time the tentative valuation is announced. Nor is such a hearing essential to the protection of its rights.
The provisions of the Act to Regulate Commerce which relate to rate hearings are almost identical in terms with p. 71those in § 19a. In both the governing words are “ investigate ” and “ hearing.” Some years ago the Commission took the position that it could base its findings in rate cases upon evidence not received at the hearing, and which was undisclosed to the carrier. But this Court in Interstate Commerce Comm. n . Louisville & Nashville R. R. Co., 227 U. S. 88, overruled the contention.
This evidence constitutes an integral part of a “ proceeding ” under the Interstate Commerce Act. Deere Plow Co. n . Jones, 68 Kans. 650; American Shipbuilding Co. v. Whitney, 190 Fed. 109. And such proceedings under the express terms of paragraph (1) of § 17 “ shall be'public at the request of any party interested.”
The excuse that these data are private and confidential information either of third persons, the Government or of the Commission or its employees, ought to have no standing whatever in a court of justice. Boston & Maine R. R. v. State, 75 N. H. 513; Wertheim v. Continental Ry. Co., 21 Blatchf. 246.
No officer of the Government, as such, has any privilege as a witness. Gugy v. Maguire, 13 Sou. Can. 33; Hartranft’s Appeal, 83 Pa. St. 433; Wigmore, Evidence, par. 2375; II Robertson’s “Trials of Burr,” pp. 517-519; I id., p. 182.
The Commission had no discretion to refuse to issue a subpoena, under § 12 of the Act to Regulate Commerce.
If the relator is entitled to have the records produced its right to have a subpoena therefor should not be denied upon the assumption that the Commission will require its employees to be present at the hearing.
The data were sufficiently described.
Mandamus is the proper remedy to compel the issuance of the subpoena. The duty is ministerial. Ex parte Peterson, 253 U. S. 300; San Francisco Gas Co. v. Superior Court, 155 Cal. 30.
The Supreme Court of the District of Columbia had jurisdiction,
This is not a suit to set aside or annul an order of the Interstate Commerce Commission. Ex parte Uppercu, 239 U. S. 435.
The order in question is an ex parte administrative one which does not relate to anyone except the Commission. Neither the relator nor any other person, outside of the Commission’s own employees, is required “to do or abstain from doing any act.” The order, therefore, is not reviewable in a direct proceeding to annul or set it aside. United States v. Illinois Central R. R. Co., 244 U. S. 82; Procter & Gamble Co. v. United States, 225 U. S. 282.
The jurisdiction which the Commerce Court obtained was only “ that now possessed by the Circuit Courts of the United States.” Jud. Code, § 207; Procter & Gamble Co. v. United States, supra. Therefore, unless the words “ Circuit Courts ” include the Supreme Court of the District of Columbia, the jurisdiction of the latter court which undoubtedly existed prior to the establishment of the Commerce Court was not vested in the Commerce Court, but has continued in the Supreme Court of the District. If the words “ Circuit Courts of the United States ” are to be construed as vesting the jurisdiction of the Supreme Court of the District in the Commerce Court, then, in the similar provision of the Urgent Deficiency Appropriations Act, 11 District Courts ” is sufficiently broad to include the Supreme Court of the District of Columbia when that jurisdiction is reinvested.
In several mandamus cases, each embracing orders of the Commission, jurisdiction arising subsequent to the enactment of the Urgent Deficiency Appropriations Act has been upheld by this Court. Interstate Commerce Comm. v. Humboldt S. S. Co., 224 U. S. 474; Kansas City Southern Ry. Co. v. Interstate Commerce Comm., 252 U. S. 178; Louisville Cement Co. v. Interstate Commerce Comm., 246 U. S. 638, p. 7364 Argument for Defendants in Error.
Mr. P. J. Farrell for defendants in error.
The District Courts of the United States have exclusive original jurisdiction of the subject matter, under the Commerce Court Act and the Act of October 22, 1913, 38 Stat. 219. The real purpose is to annul the Commission’s order of October 9, [the substance of which is given in the Court’s opinion, infra, 75,] made under the Interstate Commerce Act, particularly § 19a, par. (e).
The petition does not allege facts showing illegal acts or breach of legal duty by the defendants in error, or any of them.
The petition does not show that the Commission has refused to issue subpoenas requiring the other defendants to appear at a hearing before the Commission and testify concerning the valuation of the property referred to in the petition.
Congress intended to leave the Commission free to exercise its own discretion as to the issuance of subpoenas; and it would not be proper for the Court, by mandamus, to interfere. Interstate Commerce Comm. v. Waste Merchants Assn., 260 U. S. 32.
No particular record or datum is mentioned, or designated.
Plaintiff’s motion to the Commission was an attempt to secure a search warrant to enter upon a fishing expedition in the Commission’s Bureau of Valuation for the purpose of ascertaining whether there is anything in the working papers of the Commission’s employees which, in the opinion of plaintiff, can profitably be used by it in any hearing before the Commission which may hereafter be held upon its protest. Representatives of the plaintiff and employees of the Commission could not at the same time use the records and data mentioned, and this, we submit, clearly demonstrates the correctness of reasons for denying the motion set forth in the Commission’s order of October 9. See Jenkins v. Bennett, 40 S. Car. 393.
The theory of the plaintiff appears to be that the Commission cannot perform properly the appraisal duties under § 19a unless, upon demand, it exhibits to plaintiff for criticism all information the Commission may obtain concerning costs and values in the investigation. This ignores the difference between the duties of the Commissioners as appraisers under said § 19a, and the duties they perform in determining disputed questions of fact in rate and similar cases. Omaha v. Omaha Water Co., 218 U. S. 180. *
If the Commission, in fixing final values, commits errors of law, they can be corrected in suits instituted in District Courts of the United States; but they cannot be corrected, either before or after the final values are so fixed, in mandamus proceedings.
If, after plaintiff has introduced evidence in support of its protest, in a hearing before the Commission, evidence of a contrary import is introduced at the hearing, plaintiff will then have a right to test the accuracy, competency and relevancy of the latter evidence, but, in advance of the introduction by it of its own evidence, it may not properly insist upon being given an opportunity to examine all matters in the Commission’s Bureau of Valuation for the purpose of ascertaining whether, in its opinion, such evidence of contrary import is therein contained. And what is said here about the introduction of evidence before the Commission will be equally applicable to the introduction of evidence in court, if plaintiff challenges in court the validity of action the Commission may finally take in determining the value of the property.
Mr . Justi ce Holmes delivered the opinion of the Court.
This proceeding arises under what is now § 19a of the Interstate Commerce Act. Act of February 4, 1887, c. 104, 24 Stat. 379, as amended by Act of March 1, 1913, c. 92, 37 Stat. 701, and Act of February 28, 1920, c. 91, p. 75§ 433, 41 Stat. 456, 474, 493. Obeying this section the Interstate Commerce Commission made a tentative valuation of the relator’s property and served it upon the relator, the St. Louis Southwestern Railway Company, in July, 1921. In due time the relator filed its protest against the valuation, as provided by the act, especially against the findings of the final value of the property, the cost of reproduction new, the cost of reproduction less depreciation, present value of relator’s lands, and the present cost of condemnation and damages or of purchase of lands in excess of present value. In July, 1922, the Commission, as required, made an order setting the matter down for hearing in Washington on September 26, 1922. On July 20 the relator filed a motion with the Commission praying for an order allowing it to examine the underlying data upon which the valuation was based, and for a subpoena duces tecum to named officers of the Commission directing them to bring with them to the hearing all the data in any way relating to the matter in issue. In August the Commission canceled the hearing and in October made an order to the following effect. It recited that the opening of certain records to inspection before they were offered in evidence before the Commission in hearings upon protests or before a Court of competent jurisdiction, would be detrimental to the public interest; would make it impossible to secure as uninfluenced opinions upon land values and price and cost information as the Commission could otherwise; would unnecessarily prolong the work, and greatly increase the expense; and would seriously interfere with due performance of the regular duties of the Commission’s employees. It therefore ordered that, until further order, office or field notations, &c., in the Bureau of Valuation; opinions and correspondence from or to any employee thereof; land field notes; land computation sheets; cost information secured from others than the carrier in question; cost studies and p. 76cost analyses prepared by the Bureau of Valuation, should not be open to inspection by other than the employees of the Commission unless and until offered in evidence at hearings or before a Court as above.
Thereupon the relator filed the present petition for mandamus in the Supreme Court of the District of Columbia. It sets forth the foregoing facts in detail and annexes a copy of the valuation, with the Commission’s statement of the kinds of proof and methods used in making its findings, and further statement that those findings were based upon certain underlying facts compiled by the employees of the Bureau of Valuation, these underlying facts being indicated at some length. They embraced contracts for materials made over the whole country for the ten years ending June 30, 1914; contracts for constructing railroads or parts during the same time; actual expenditures for various classes of construction work in unidentified projects selected by the Bureau; books, vouchers and invoices of materials, &c., used in construction during the same time; undisclosed records purporting to show the service life of various classes of material, &c., together with an inspection report by the Bureau’s engineers showing the age of the materials, &c., in relator’s railroad. From such data, classified and selected, compilations and analyses were made purporting to show average cost of materials, &c., &c., and the average ratios of engineering and general expenses during construction and interest during construction to cost of construction in selected projects, and the average service, life, age, &c., of the various units of property in relator’s railroad. These compilations were used as the basis for finding cost of reproduction new and cost of reproduction less depreciation in the relator’s case. Similarly the present value of relator s lands is said to have been reached upon uncommunicated data which it is not necessary to repeat, and the present cost of condemnation or damage or of p. 77purchase in excess of the present value of relator’s land is said to have been reached in the same general way. The foregoing data are alleged to have been reduced to writing and to be within the control of the Commission. It is alleged, that much of the information gathered was not under oath and that many statements were made orally and that many opinions were taken from persons not qualified to express the same.
The relators prayed for an order directing the Commission to allow it to examine these underlying data, contracts, reports, compilations and records of the Bureau of Valuation so far as in any way related to valuation of the relator’s property, and to make written and photographic copies of the same. It also asked that the Commission be directed to issue subpoenas to named officers as in the motion made to the Commission stated above. On a motion to that effect the petition was dismissed by the Supreme Court and the judgment was affirmed by the Court of Appeals. We are of opinion that the judgment was right, and will indicate not only the grounds of our decision but what we think that the relator reasonably may demand.
The relator’s claim of right has for its broadest basis the fact that the valuation when made final by the Commission will be prima facie evidence in various judicial proceedings in which the value of the property is material to the decision of the case. But the legislature may make one fact prima fade evidence of another if the inference is not “ so unreasonable as to be a purely arbitrary mandate.” Lindsley v. Natural Carbonic Gas Co., 220 U. S. 61, 82. If Congress had given no hearing before the Commission but still had made its conclusion prima fade evidence of value, it would be hard to say that any constitutional rights of the railroads had been infringed. Reitler v. Harris, 223 U. S. 437; Meeker v. Lehigh Valley R. R. Co., 236 U. S. 412, 430. The strongest basis for the relator’s claim is the statute itself.
The statue provides that “ Unless otherwise ordered by the commission, with the reasons therefor, the records and data of the commission shall be open to the inspection and examination of the public.” The Commission has ordered otherwise as we have stated and the order puts an end to the claim to examine the data on the naked ground that they are public documents. But as the statute provides for a hearing before the Commission it does not follow necessarily that the parties to the proceeding are subject to the same rule when the data are desired as evidence. The hearing to be sure is not of the ordinary kind. The railroads have no adversary. The Commission of course has no object except to arrive at the truth. It is not to be cross examined for bias or otherwise as to its capacity to decide or modes of deciding what is entrusted to it, but on the other hand, since it must grant a hearing, manifest justice requires that the railroads should know the facts that the Commission supposes to be established, and we presume that it would desire the grounds of its tentative valuation to be subjected to searching tests. But there are necessary limits. While there can be no public policy or relation of confidence that should prevail against the paramount claim of the roads, the work of the Commission must go on, and cannot be stopped as it would be if many of the railroads concerned undertook an examination of all its papers to see what they could find out. We need not now consider whether the statute authorizes the order if it be construed to apply to cases like the present, for we cannot doubt that this Commission will do all in its power to help the relator to whatever it justly may demand. As yet it has made no just demand, for we accept the Commission’s statement that a general examination in the Commission’s offices would interfere too much with its work. Moreover, at the hearing there will be limits, at the discretion of the Commission, to the right to delay the sittings by minute in- p. 7964 Syllabus.
quiries that might protract them indefinitely. See Newton v. Consolidated Gas Co., 258 U. S. 165, 175. But subject to that discretion, we think that, in such way as may be found practicable, the relator should be enabled to examine and meet the preliminary data upon which the conclusions are founded and to that end should be given further information in advance of the hearing, sufficient to enable it to point out errors, if any there be. No present need is shown for the issue of subpoenas; and with this intimation of our views of the Railroad’s rights we repeat our opinion that the judgment should be affirmed.
Judgment affirmed.
Mr . Justice Butler took no part in the decision of this case.
RAILROAD COMMISSION OF TEXAS ET AL. v. EASTERN TEXAS RAILROAD COMPANY ET AL.
STATE OF TEXAS v. EASTERN TEXAS RAILROAD COMPANY ET AL.
APPEALS FROM THE DISTRICT COURT OF THE UNITED STATES FOR THE WESTERN DISTRICT OF TEXAS.
Nos. 145 and 146. Argued March 8, 1923—Decided February
18, 1924.
1
The usual permissive charter of a railroad company does not oblige the company to operate its railroad at a loss; nor is such obligation to be implied from acceptance of the charter and operation under it. P. 85.
2
In the presence of a reasonable certainty that future operation will be at a loss, a railroad company, in the absence of a contract, may cease operation, dismantle its road and realize its salvage value. Id.
3
Were the railroad to be compelled by the State in such circumstances to continue operation at a loss, it would be deprived of its property without due process of law. Id.
Statement of the Case. 264U.S.
4. The principle allowing a railroad company to withdraw its property from public use that can be kept up only at a loss, is consistent with the State’s power to regulate while the company continues to exercise the privileges of its charter. P. 85.
5. The mere presence of a particular provision in the statutes of a State relating to railroads, or even in a special act incorporating a railroad company, does not suffice to show that the provision is a part of the charter contract. P. 86.
6. When it becomes necessary to consider whether a State is attempting to deprive a litigant of property without due process, and the question turns on the existence and terms of an asserted contract, this Court determines for itself whether there is a contract and what are its terms. Id.
7. Article 6676, Rev. Civ. Stats. 1911, of Texas, requiring all railroads “ carrying passengers for hire,” to run certain passenger trains and make certain stops, etc., is a mere regulation of passenger service on roads in operation, and does not subject a railroad company, through charter contract or otherwise, to an absolute duty to operate for its full charter period in face of a reasonable certainty of pronounced loss. P. 87.
8. Article 6625, Rev. Civ. Stats. 1911, of Texas, (Act of March 29, 1889, c. 24) relates to the organization, rights and duties of corporations formed to take over, maintain and operate railroads sold under judicial decree, etc., and the clause, in its proviso, “ nor shall the main track of any railroad once constructed and operated be abandoned or removed,” applies only to railroads so sold. P. 88. 283 Fed. 584, affirmed.
Appeals from two decrees of the District Court, the first awarding a permanent injunction in the Railroad Company’s suit, brought in that court, to restrain the Railroad Commission of Texas, and others, from interfering with its right to abandon operation and dismantle and salvage its property; the second, dismissing a bill to restrain such abandonment, etc., brought by the State in a court of the State and removed to the District Court. See also 258 U. S. 204, where the same cases were passed upon by this Court in another aspect.
Mr. W. A. Keeling, Attorney General of the State of Texas, with whom Mr. Walace Hawkins and Mr. Frank p. 8179 Argument for Appellants.
Kemp, Assistant Attorneys General, were on the brief, for appellants.
The Eastern Texas Railroad Company is under contract to maintain and operate its railroad continuously for the term of its charter. Dartmouth College v. Woodward, 4 Wheat. 518; Northern Securities Co. v. United States, 193 U. S. 347; Bullock v. Railroad Comm., 254 U. S. 513; International, etc. Ry. Co. v. Anderson County, 246 U. S. 424; Same v. Same, 106 Tex. 60; Ricaud v. American Metal Co., 246 U. S. 304; Horn Silver Mining Co. v. New York, 143 U. S. 313; Robbins v. Shelby Taxing District, 120 U. S. 489.
The Company is under statutory duty to maintain and operate its railroad during the term of its charter. State v. Enid, etc., Ry. Co., 108 Tex. 239; Enid, etc., Ry. Co. v. State, 181 S. W. 498; State v. Sugarland Ry. Co., 163 S. W. 1047.
The St. Louis Southwestern bought the stock of the Eastern Texas, except qualifying shares, and has since operated the road.
Regardless of the specific statute, and even if it be correctly limited to “ sold out ” railroads, we submit that the manner by which the St. Louis Southwestern came to own the stock of the Eastern Texas makes the statute under such construction applicable. Chicago, etc., Ry. Co. v. Minneapolis Civic Assn., 247 U. S. 490.
Because it is technically a separate legal entity, it does not follow that the Eastern Texas is an independent public carrier, free in the conduct of its business from the control of the company which owns its capital stock, furnishing its officers and electing directors. Article 6676, Tex. Rev. Civ. Stats. 1911, requiring operation of trains from day to day, is applicable.
The federal courts usually follow the state courts in arriving at the contract and statutory obligations exist-
97851°—-24——6
ing between a State and its corporations. Ricaud n . American Metal Co., 246 U. S. 304; International, etc., Ry. Co. v. Anderson County, 246 U. S. 431; Missouri Pacific Ry. Co. v. Kansas, 216 U. S. 262; Burgess v. Seligman, 107 U. S. 20; Kuhn v. Fairmont Coal Co., 215 U. S. 349.
The constitutionality of the statute is immaterial when the company accepts the charter. Interstate Consolidated Street Ry. Co. v. Massachusetts, 207 U. S. 79.
The Fourteenth Amendment, preventing an unconstitutional taking of property, is not available to a railroad company seeking to escape a contract and statutory duty to continue operation and maintenance of its lines of railroad even at a loss. Brooks-Scanlon Co. v. Railroad Comm., 251 U. S. 396; Missouri Pacific Ry. Co. v. Kansas, 216 U. S. 262; Bullock v. Railroad Comm., 254 U. S. 519; International, etc., Ry. Co. v. Anderson County, 246 U. S. 424; State v. Enid, etc., Ry. Co., 108 Tex. 239; Ashley v. Ryan, 153 U. S. 436; Newburyport Water Co. v. Newburyport, 193 U. S. 561.
Mr. Ino. R. Turney, with whom Mr. Daniel Upthegrove, Mr. E. B. Perkins, Mr. E. J. Mantooth and Mr. W. B. Hamilton were on the briefs, for appellees.
Mr . Justice Van Devant er delivered the opinion of the Court.
These two suits involve the right of the Eastern Texas Railroad Company, a Texas corporation having a railroad in that State, to dismantle and abandon its road. One was brought by the company to prevent threatened interference by the State’s officers; the other by the State to prevent intended dismantling and abandonment by the company. The former was begun in the District Court; the latter was removed into that court from a state court. The company prevailed, 283 Fed. 584, and the State and its officers prosecute these direct appeals.
The road is 30.3 miles long and all in Texas. The company constructed it in 1902, operated it continuously until April 30, 1921, and then discontinued its operation because it had proved a losing venture. The traffic over it during the period of operation was in greater part interstate and foreign commerce and in lesser part intrastate commerce. The withdrawal from interstate and foreign commerce had the sanction of the Interstate Commerce Commission, given under a law of Congress, and was sustained by this Court in Texas v. Eastern Texas R. R. Co., 258 U. S. 204. The present controversy relates to the withdrawal from intrastate commerce and the intended dismantling and abandonment of the road.
The road was constructed primarily to carry traffic to and from large lumbering industries in that territory; but in the course of time those industries exhausted the adjacent supply of timber, and in 1917 they were permanently closed and the people who had been employed in them moved away. The traffic over the road then fell off so much that the revenue became pronouncedly less than the cost of operation. But the operation was continued until the company had exhausted its surplus accumulated in prior years, had come to be without cash or credit, and was unable to go on. Its only remaining property consisted of the road and some meager equipment; and these had shrunken in value from $450,000 to $50,000,—the latter being the estimated salvage value less the cost of dismantling. The property was offered for sale at $50,000 to any one who would operate the road, and the offer was widely advertised, but without eliciting any acceptance or bid. Essential repairs would cost $185,000. The operating cost would be as much as $84,000 per year; the possible revenue from all traffic would not exceed $50,000, and that from intrastate traffic would not be more than $20,000. The adjacent country was sparsely populated; the soil had proved to be usually unproductive; there were
Opinion of the Court 264 U.S.
no local industries, and the general situation precluded any reasonable expectation that the road would become self-sustaining in the future. In these circumstances the company concluded to cease all operation and to dismantle and abandon the road.
The company was incorporated under a general law of the State in 1900 for a term of 25 years, and when it ceased operating the road four and one-half years of that term remained. It had not received any state land grant or other public aid; nor had it acquired any property through an exercise of the power of eminent domain, although that power was available under the law of the State.
In the District Court, the State and its officers took the position that under the state statutes the company was prohibited from dismantling or abandoning its road and was in duty bound, and could be compelled, to operate the same in intrastate commerce for the remainder of the 25-year term. In this Court they have adhered to that position, with the qualification that, in the circumstances shown, the company may not be compelled to operate the road but may be made to respond in damages to the State for a failure to operate it. The company, on the other hand, has contended throughout that the state statutes neither prohibit the dismantling and abandonment of the road nor lay on the company a duty to operate it when that can be done only at a loss, and that, if the statutes be as insisted on the other side, they deprive the company of property without due process of law and in that respect are in conflict with the Fourteenth Amendment to the Constitution of the United States.
The appellants rely on two statutory provisions, which they insist were in force when the company was incorporated and became a part of the charter contract. Before examining these provisions it is well to advert to principles which would govern in their absence, and also to considerations bearing on their office and effect.
The usual permissive charter of a railroad company does not give rise to any obligation on the part of the company to operate its* road at a loss. No contract that it will do so can be elicited from the acceptance of the charter or from putting the road in operation. The company, although devoting its property to the use of the public, does not do so irrevocably or absolutely, but on condition that the public shall supply sufficient traffic on a reasonable rate basis to yield a fair return. And if at any time it develops with reasonable certainty that future operation must be at a loss, the company may discontinue operation and get what it can out of the property by dismantling the road. To compel it to go on at a loss or to give up the salvage value would be to take its property without the just compensation which is a part of due process of law. The controlling principle is the same that is applied in the many cases in which the constitutionality of a rate is held to depend upon whether it yields a fair return. Brooks-Scanlon Co. v. Railroad Commission of Louisiana, 251 U. S. 396, 399; Bullock v. Railroad Commission of Florida, 254 U. S. 513, 520; State ex rel. Cunningham n . Jack, 113 Fed. 823; s. c. 145 Fed. 281; Iowa v. Old, Colony Trust Co., 215 Fed. 307, 312; Northern Pacific R. R. Co. v. Dustin, 142 U. S. 492, 499; Commonwealth v. Fitchburg R. R. Co., 12 Gray, 180, 190; State v. Dodge City, etc. Ry. Co., 53 Kan. 329, 336.
So long as the railroad company “ continues to exercise ” the privileges conferred by its charter, the State has power to regulate its operations in the interest of the public, and to that end may require it to provide reasonably safe and adequate facilities for serving the public, even though compliance be attended by some pecuniary disadvantage. Atlantic Coast Line R. R. Co. v. North Carolina Corporation Commission, 206 U. S. 1, 26; Missouri Pacific Ry. Co. v. Kansas, 216 U. S. 262, 279; Chesapeake & Ohio Ry. Co. v. Public Service Commission, 242 p. 86U. S. 603, 607. But this rule in no wise militates against the principle that the company may withdraw its property from use by the public “ when that use can be kept up only at a loss.” Brooks-Scanlon Co. v. Railroad Commission of Louisiana, supra.
A State often has many laws relating to railroads on its statute books which do not become a part of the charter contract,—which are of such a nature that it is apparent the State could not have intended to make or exact a continuing and binding stipulation embodying their terms. Among such laws are those containing specific regulations respecting the safety of employees and travellers, liability for injuries, facilities for handling and moving traffic and redress for failure to provide the facilities prescribed. The occasion for keeping such matters where the legislature may deal with them as changing conditions may require forbids that they be regarded as part of the charter contract unless a purpose to make them such be plainly disclosed. In short, the fact that a particular provision is found in the statutes of the State relating to railroads, or even in a special act incorporating a railroad company, does not in itself suffice to show that the provision is a part of the charter contract. Texas & New Orleans R. R. Co. v. Miller, 221 U. S. 408, 415; Chicago, Burlington & Quincy R. R. Co. v. Railroad Commission of Wisconsin, 237 U. S. 220, 234. And see Wisconsin & Michigan Ry. Co. v. Powers, 191 U. S. 379, 387.
Where it becomes necessary to consider whether a State is depriving, or attempting to deprive, a litigant of property without due process of law in violation of the Fourteenth Amendment, and the question turns on the existence and terms of an asserted contract, this Court determines for itself whether there is a contract and what are its terms. Louisville & Nashville R. R. Co. v. Palmes, 109 U. S. 244, 255; Stearns v. Minnesota, 179 U. S. 223, 232. “ The principle is general and necessary. Ward v. p. 87Love County, 253 U. S. 17, 22. If the Constitution and laws of the United States are to be enforced, this Court cannot accept as final the decision of the state tribunal as to what are the facts alleged to give rise to the right or to bar the assertion of it even upon local grounds.” Davis, Director General of Railroads, v. Wechsler, 263 U. S. 22, 24.
By way of distinguishing the cases in hand from some which are cited by the appellants it is enough to observe that here the company has ceased to exercise the privilege conferred by its charter, of maintaining and operating the road as a common carrier,—and this because the available traffic has diminished to a point where further operation is economically impossible.
One of the statutory provisions relied on is found in Article 6676 of the Revised Civil Statutes of 1911, and requires that on all railroads “carrying passengers for hire ” there shall be at least one passenger train a day, Sundays excepted; that these trains shall stop at stations a sufficient time to discharge and receive passengers, and that, “ if so many are run ”, four of these trains going each way shall stop daily, Sundays excepted, at county seats. This is nothing more than a regulation of passenger service on roads which are in operation and engaged in that service. It does not purport to impose an unconditional duty to operate, or to carry passengers, but requires that where and while a passenger service is maintained it shall conform to the standards stated. Such a provision falls far short of subjecting a railroad company, through charter contract or otherwise, to an absolute duty to operate its road for the full charter period, even after it becomes reasonably certain that the operation will be at a pronounced loss.
The other provision on which the appellants rely was enacted as part of an Act of March 29, 1889, c. 24, and was reenacted as Article 4550 of the Revised Civil p. 88Statutes of 1895, and as Article 6625 of the like statutes of 1911. The original enactment is described in its caption as relating “ to rights of purchasers of roadbeds, etc., sold for debt,” and in the captions of both reenactments as relating to “ new corporations in case of sale.” It provides that the purchasers of any railroad sold under judicial decree, etc., and their associates shall be entitled to form a corporation to take over, maintain and operate the road with power to “ construct and extend.” This is followed by provisos of a restrictive nature, the last of which reads: “ Provided, that by such purchase and organization no rights shall be acquired under any former charter or law in conflict with the provisions of the present constitution in any respect, nor shall the main track of any railroad once constructed and operated be abandoned or removed.” A second section provides that any corporation so formed which shall 11 claim to be under the jurisdiction of the federal courts” shall thereby forfeit its reorganization, etc., and a third section declares the existence of an emergency requiring that the act take effect immediately on its passage, because of the absence of any sufficient law providing for the formation of a corporation “ for the purpose of acquiring, owning, and extending such sold out property.” A reading of the enactment, including its caption and emergency section, shows that every part of it relates to the organization, rights and duties of corporations formed to take over, maintain and operate railroads sold under judicial decree, etc., unless the concluding part of the proviso just quoted is to be taken as having a broader scope. The appellants contend that it should be so taken. Read by itself it gives strong support to the contention. But can it be rightly separated from the context and read alone? Does it when so read reflect the legislative intent? In our opinion the answers must be in the negative. The provision evidently is intended to have the p. 89same scope as the other parts of the act, and to be limited to the same railroads that they are. The captions used to describe the subject of the enactment give some support for this view, and the terms of the emergency section give it further support, for they make it fairly certain that only railroads sold for debt were in mind. The fact that the provision is included in a proviso strongly suggests that it is intended to qualify or restrict what precedes it rather than to reach into a larger field, and the suggestion is emphasized by the first part of the proviso, “ that by such purchase and organization no rights shall be,” etc. A single word, supplied by fair implication, will bring the provision into full accord with all that is in the proviso, and with all other parts of the act. With that word included, the provision will read “nor shall the main track of any [such] railroad once constructed and operated be abandoned or removed.” To us it appears very plain that this is what is intended.
There was no decision on the question in the courts of the State when the company was incorporated or when it made its investment in the road. Two decisions made several years later have a bearing but seem to leave the matter more or less open even in those tribunals. One by the Supreme Court, given in 1917, treats the provision as applicable to all railroads. But the question was not discussed, possibly because the road there involved had been sold under a judicial decree. State v. Enid, Ochiltree & Western Ry. Co., 108 Texas, 239. The other by the Court of Civil Appeals at Galveston, given in 1922, appears to treat the provision as applicable only to railroads sold for debt. Wexler v. State, 241 S. W. 231.
As already indicated, we are of opinion that the provision, like other portions of the enactment of which it is a part, applies only to railroads sold under judicial decree, etc. This road never was so sold. The company did not acquire it through such a sale, but constructed it as an original undertaking.
Our conclusion is that the appellants’ reliance on the two statutes is not well grounded. They are all that are claimed to make the company’s charter other than one of the usual. permissive type. It follows that the District Court rightly held the company was entitled to withdraw the road from intrastate commerce and to dismantle and abandon it.
Decrees affirmed.
1
The docket title of this case is: Steamship “ Gul Djemal,” her engines, etc.; Hussein Lutfi Bey, Master, v. Campbell & Stuart, Inc, 1 “ First: That at all the times mentioned in the libel herein, and at the time of the arrest of the Gul Djemal, the Gul Djemal was owned by the Turkish or Ottoman Government, that it flies the Turkish flag; that Turkey has but one flag, for both national and commercial uses; that it is registered in the name of Seire-Seffain Administration; that the Gul Djemal is the absolute property of the Ottoman Seire-Seffain Administration, the third division of the Ministry of Marine of the Turkish Government, which is attached to the Ministry of War; that the maritime title has been given to the Administration Seire-Seffain by the Ministry of War. Said Seire-Seffain Administration, at the times above mentioned, was (and is) the Transport Section of the Ministry of Marine, and was (and is) charged with the control of transport vessels of the Turkish Government, and said vessels, (of which the Gul Djemal was one) which are capable of commercial uses, are, when not used as transports, used in commerce; whether such vessels are used as transports or in commerce is subject to the direction of the Ministry of Marine, which, through departments other than the Seire-Seffain, has charge of battleships, artillery, torpedoes, wireless, and engineering work pertaining to all the vessels of the Turkish Navy; that the Gul Djemal was transferred for operation to the Administration Seire-Seffain from the Ministry of War in 1914 and has since been under the control of Administration of Seire-Seffain. “ Said Seire-Seffain Administration, at the times above mentioned, had (and has), as its head, a military officer of the Turkish Govern-Turkish Government through the Administration Seire-Seffain; said master, at the times above mentioned, was (and is) a reserve officer in the Turkish Navy employed by the branch of the Ministry of Marine known as the Administration Seire-Seffain, and the navigating officer was a Lieutenant in the active service of the Turkish Navy, both detailed by the said Ministry of Marine to serve on the Gul Djemal during the times above mentioned, but in such service they were not performing any naval or military functions, although they were subject to any orders from the department of the Turkish Government charged with naval or military affairs; the other officers relations with the Turkish Government by American Consular representatives, and through the medium of a High Commissioner; that during said period of the severed relations, the Spanish Ambassador to the United States has represented, and still represents, Turkish interests in the United States, and has been recognized as such representative by the Department of State of the United States of America. “Fifth: That the Turkish or Ottoman Government, and the Government of the United States of America, are sovereign governments, and were at all the times mentioned herein, at peace with each other, although the Turkish or Ottoman Government was and is an ally of the enemy of the United States in the World War.”