Missouri Pacific Railway Co. v. Kansas ex rel. Railroad Commissioners

delivered the opinion of the court.

This is a writ of error to a judgment of the Supreme Court of Kansas ordering a peremptory mandamus commanding the Missouri Pacific Railway Company to obey an order of the state board of railroad commissioners. The order directed the putting in operation of a passenger train service between Madison, Kansas, and the Missouri-Kansas state line, on what is known as the Madison branch of the Missouri Pacific ■ Railway Company.

, The branch road in question lies between Madison, Kansas, and Monteith Junction, Missouri. From Madison to the state line is 89 miles and from the state line to Monteith Junction is 19 miles, the total distance between the two terminal points being 108 miles. At Monteith Junction the Madison branch intersects with the Joplin line of the Missouri Pacific, by means of which connection is made with Kansas City and other points. There being no terminal facilities at Monteith' Junction, the trains ■ operated on the Madison branch do not. remain over at the junction, but run aa far as Butler station, three miles distant on the -Joplin line, where terminal facilities' exist!

There are no large'towns-On the Madison branch, either fin Kansas or Missouri, and the country which-that branch serves is largely agricultural, Kansas City being the nearest and

Without clearing up some confusion in the record upon the subject, we take the fact to be as stated by the court below, that the branch between Madison and Monteith Junction, at least so far as it Was constructed within the State of Kansas, ■ was built by a Kansas corporation chartered in 1885, known as the Interstate Railroad Company, and that to aid in the building of the road within the State of Kansas about "two hundred thousand dollars.was contributed by counties through which the road passed. A construction company did the work, at the contract cost of $1,095,000, and this sum was paid by the railway company by delivering to the ^contractors an issue of $1,622,000 of six per cent mortgage bonds. -The Interstate Railroad Company, in July, 1890, consolidated with another Kansas corporation known as the St. Louis and Emporia Railroad Company, the consolidated company being, designated as the Interstate Railway Company. Subsequently, in December, 1890, by authority of a statute of. Kansas, the Interstate Railway Company and eleven other Kansas railway corporations wore, consolidated, the consolidated company-being designated as the Kansas and Colorado Pacific Railway Company.

In September, .1905, residents along the Madison branch within the State of Kansas filed a petition with the board of railroad commissioners, alleging, in substance, that only a mixed train was furnished for passenger service on the branch, that such service, subjected the public to great inconvenience, prevented anjdhing like a regular and timely passenger service, and, besides, was dangerous to those traveling over the road. An order was prayed requiring the Missouri Pacific to operate a regular passenger train over the branch road between Madison and the state line. The evidence introduced before the board is not in the record. After a hearing, the" following finding and order was made (76 Kansas, 490):

“Now, on this seventh day of December, 1905, after hearing the evidence and argument of counsel, in the above-entitled action, the board finds that during the years 1902 and 1903, when the respondent railway company operated a passenger train on said Madison branch of its line, that the said passenger train was operated at a loss, and there was no testimony introduced at this hearing that the train, if put on as asked for by the petitioners,' could be operated at a profit to the respondent company. The board believes that the people along the lino of the Madison branch of said company are entitled to better passenger train service than they are

now receiving, and it has been represented to the board by officers of said company that the respondent is constructing motor cars for establishment on its branch lines that can be operated at a much less expense than steam service.

“It is therefore ordered by the board that on or before the first day of May, 1906, a motor passenger car service be put on and operated on said Madison branch, from Madison, Kansas, to the Kansas and Missouri state .line, and in the event sai(í railroad company is unable at that time to put on a motor car passenger service, a regular steam passenger train service be forthwith put on and operated.” ■

The road not having obeyed, this proceeding by mandamus was commenced to compel eompliapce.

Three special defenses were set up in the return to the alternative writ. In the first it was insisted that the branch road was an interstate roacl and could only be operated as such, and, therefore, was not subject to the jurisdiction of the railroad commission or the courts of the State of Kansas, and in the second it w^s claimed that the burden which would be.occasioned bjr compelling the operation of a passenger train service -would be confiscatory and in violation of rights protected by the Fourteenth Amendment. The court below, in its opinion, thus, we think, accurately summarized the daborate averments relating to the two defense's just referred to (76 Kansas, 470'):

“To the alternative writ an answer was filed which denies that the company operated the Madison branch as- a line of road wholly within the State of Kansas, and alleges that said branch is a part of the Missouri Pacific general system; that defendant, maintained terminal facilities for the said branch at Butler, Mo., twenty mikys east of the Kansas State line, where1 the-branch connects with the main line of defendant’s railroad, that the companj1’ has no terminal facilities near the State line within the State of Kansas, and that the branch road cannot be operated as .a road within the State of Kansas without such terminal 'facilities, to maintain which would

■ involve the company in ruinous expense. It also alleges that the order is unreasonable and confiscatory, and that the company could not comply-with it without great financial loss; that the entire revenue of the road within the State of Kansasj including passenger and freight business, is insufficient to' meet the expense and cost of operating the road within the State; that'from July 1, 1903, to April 30,1905, it maintained separate passenger train service upon this branch, but was obliged to abandon the same and return to the mixed passenger and freight service because the total receipts- of passenger- and freight business during that period proved wholly insufficient to meet the expenses of operation. It further alleges that compliance with the-order of the board would compel defendants to divert its Revenues from other lines and parts of its system outside the State of Kansas to the maintenance, of separate passenger train service in the State, and that the extent of such-additional cost would amount to a confiscation of its property.”

The third defense set up that the company was diligently endeavoring to perfect a motor car for experimental purposes, that, the practical utility of such service on railway tracks was problematical, and that-it was the design of the company “to test the practicability of said character of service on its said Madison branch line as soon as the same can be done, and is also its design to furnish said motor car service*for separate passenger traffic if the cost of said service can be brought within the passenger* service cost of the mixed train service, which it now furnishes, and if said motor car service can be successfully operated from the standpoints* of utility and safety and other considerations necessary to be taken into account.”

By stipulation a referee was appointed to take evidence and report findings of fact and conclusions of law. The referee transmitted the evidence taken and made lengthy findings of fact," upon which his conclusions of law were stated, Thoco conclusions briefly were that although-it might be un

It was recognized by the Supreme Court of Kansas when it came to consider the report of the referee that the authority which the commission had exerted in making the order took its source in a section of the act of the legislature of Kansas enacted in 1901, and now found in § 5970, General Statutes of Kansas of 1901, the section being as follows:

“Whenever in the judgment of the railroad commissioners it shall appear that any railroad corporation or other transportation company fails in any respect or particular to comply with the terms of its charter or the laws of the State, or whenever in their judgment any repairs are necessary upon its road, or any addition to its rolling stock, or any addition to or change of its stations or station houses, or any change in its rates for transporting freight, or any change in the mode of operating its road and conducting its business, is reasonable and'expedient in ordei to promote the security, convenience and accommodation of the public, said commissioners shall inform such corporation of the improvement and change's which they adjudge to be proper, by a notice thereof in writing, to be served by leaving a copy thereof, certified by the commissioner’s secretary, with any station agent, clerk, treasurer or any director of said corporation; and if such orders are not complied with, the said commissioners, upon complaint, shall proceed to enforce the same in accordance with the provisions of this act as in other cases.”

A brief summary of the questions passed on the court will serve to an understanding, of the. assignments of error which we are called upon to consider:

a. The court disposed of certain contentions which would seem to have been raised at the argument concerning the re-pugnancy to the state constitution of the law creating the commission and conferring authority upon that' body, and held the objections untenable. As these involved matters of purely state concern we. shall not further refer to them.

b. The court also adversely disposed of a contention based upon the assumption that the railway 'company had by its charter a contract right to regulate.- the time and manner of operating its trains, and hence was not subject to the order which the commission had made. Although such contention ■ did not deny that the charter right relied oh was subject to repeal or amendment by the legislature, it'was urged that, as the legislature had not expressly amended or repealed the. right, such a result should not be made to flow from the section conferring powers upon the commission, as repeals by implication were not favored.

Having thus cleared the way for the. graver questions which the case involved, the court came to consider, first, the reasonableness on its face of the order of-the commission, viewed in the light of the findings of that body; second, the reasonableness of the order tested.by the findings nf the referee' and the evidence upon which such findings were based; and third, the ' validity of the orden- in view of the power of Congress to regulate interstate commerce as applied to the nature and character of the road to which the order of the commission was made applicable.

The grievances which the railroad company deems it majn endure by the enforcement of the order of the commission as commanded by the court are expressed in many assignments of error. To consider them in detail is not essential, as all the complaints which they embrace were (unbodied in the argument at bar by the counsel for the railway company in the following propositions:

"First. The order of the board and the mandate of the

State court were, in substance and effect, a regulation of-commerce among the States, and the court was without power or jurisdiction in the .premises.

“Second. The order óf the board, On its face, is manifestly unreasonable, and, in the light of the findings of fact, arbitrary, and without the" first element of due process of law, and a denial of the equal protection of, the law guaranteed by the Federal Constitution.

“Third. The order and judgment of the Statc,court, on the. evidence and facts found, deprived the railroad company of its property without due process of law, and without compon-: sation, and denied to it the equal protection of the law.

. “Fourth. The order of the board of railroad commissioners was an usurpation of power'by the board, and the construction placed upon the law by the State court impaired the obligation of the contract, between-the State and the railway company, in violation of the Constitution of the United States, and deprived it of its property without due process of law and without compensation, and denied to it the equal protection of the law.”

While it may bo that in some of their aspects each of the first three propositions involve considerations apparently distinct from the others, as- in- substance the ultimate reasons ’ by whic|r all three are controlled, are identical, we consider them together. Before doing so, however, we dispose of the question concerning the alleged impairment of a' contract right, protected by the Constitution of- the United States, which is formulated in the fourth .proposition, by pointing ‘out the twofold contradiction upon which the proposition is . based.. As it is not denied that the asserted charter right was held subject to the power of the State to repeal, alter or amend, it follows that the proposition amounts simply to saying that an irrepealable contract right arose from a contract 'Which waA repealable. Hammond Packing Co. v. Arkansas, 212 U. S. 322 , 345. Stating the contention in a different form, the same contradiction becomes a'pparent. As

The court .in Atlantic Coast Line v. N. Car. Corp. Com’n,, 206 U. S. 1 , reiterating a doctrine expounded in preceding -cases, said (p. 19):

“The elementary proposition that railroads from the public nature of the business by them carried on and the interest which the public have in their operation are subject, as to their state business, to state regulation, which may be exerted either directly by the legislative'authority or by administrative bodies endowed with power to that end,- is not and could not be successfully questioned in view of the long line of authorities sustaining that doctrine.”

Also in the same case, resta ing a principle previously often announced, it was held- (p. 20) that railway property was susceptible of private ownership, and that rights in and to such property securely rested under the constitutional guarantees by which all private property was protected. Pointing out that there was no incompatibility between the two-, the truism was reannounced that the right of private ownership was not abridged by. subjecting the enjoyment of .that right to the power of reasonable regulation, and that such governjnental power could not in truth be said to be curtailed because it could not be exerted arbitrarily and unreasonably without impinging on /the enduringiguarahtees by which the Constitution protected property^ rights.

The Coq,st Line case was concerned with the exertion of

Coming to apply the principles just stated to the order in question, and considering it generically, it is obvious that if exerted a lawful state poyrer. Its commands were directed to.a railroad corporation which, although chartered by other States, w$s also chartered by Kansas, and concerned the movement of a train on a branch road wholly within the State which had been built under the authority of a Kansas charter, although the road was being operated .by the Missouri Pacific under lease. The act commanded to be done was simply that a passenger train-service be, operated over the branch line within the State of Kansas. Unless then for some reason, not manifested in the order, intrinsically considered, it must be treated as such an arbitrary and unreasonable exercise of power as to cause it to be, in effect, not a regulation, but an infringement upon the right of ownership, or, considering the surrounding circumstances, as operating a direct burden upon interstate commerce, .if is clear that, within the doctrine previously staff'd, no error was committed in directing compliance with the order. And this brings us to consider the. several'reasons relied upon to establish, first, that the order made by the railroad commission was so arbitrary and unreasonable as to cause it to bo void for want, of power; or, second, that the order was .void because its necessary operation was to place a direct burden upon interstate commerce.

In its principal aspect this contention is based on the insistence that the order and findings of the commission and the findings of the referee, when elucidated by the proper in-ferencos of fact to. be drawn from the evidence, show the service which the order commanded could not be rendered without a pecuniary loss. And this, it is insisted, is the case, not only because of the proof that pecuniary loss would be occasioned by performing the particular service ordered,- considering alone the cost of that service and the return from its performance, but also because it is asserted the proof establishes that the earnings from all sources, not only of the branch road, .but of all the roads operated by the Missouri Pacific in Kansas, produced no net revenue and left a deficit. It is at once evident that this contention challenges the correctness of the inferences of fact drawn by the court below. They therefore assume that we arc not bound by th.e facts as found by the court below, but must give to the evidence an independent examination for the purpose of passing on the constitutional question presented for decision. But we do not think that the case here presented requires us to consider the issues of fact relied upon, even if it be conceded, for the sake of argument only., that on a writ of error to a state court, where a particular exertion of state power is assailed as confiscatory because ordering a service to be rendered for an inadequate return, the proof upon- which the claim of confiscation depends would be open for our original consideration,'as the essential and only means for properly performing our duty of independently ascertaining whether there had been, as alleged, a violation of the Constitution. We say this because, when the controversy here presented is properly analyzed, the first and pivotal question arising is whether the order complained of did anything’more than command tlm railroad company'’ to perform a service which it was incumbent upon it to perform as the necessary result of the possession and on-

“This is so (the distinction) because as the primal duty of a carrier is to furnish adequate facilities to the public, that duty maywell be compelled, although by doing so as an incident some pecuniary loss from rendering such service may result. It follows, therefore, that the mere incurring of a loss from the performance of such a duty does 'not in and of itself necessarily give rise to the conclusion of unreasonableness, as would be the case where the whole scheme of rates was unreasonable under the doctrine of Smyth v. Ames. . . .

“Of course, the fact that the furnishing of a necessary facility ordered may occasion an incidental pecuniary loss is an important criteria to be taken into view in determining the reasonableness of the order, but it is not the only one. As the duty to furnish necessary facilities is coterminous with the powers of -jhe corporation, the obligation to discharge that duty must be considered in connection with the nature and productiveness of the corpoi'ate business as a whole, the character of the services required, and the public need for its performance.

Indeed, the principie which wras thus applied .in the Atlantic

It may not be doubted that the road by virtue of the charter under which the branch was built was obliged to carry, passengers and freight, and therefore as.long as it enjoyed its charter rights was under tlie inherent obligation to afford a service for the carrying of passengers'. In substance this was all the order commanded, since it was confined to directing that the road put on a train for passenger service. True it is that the road was carrying passengers in a mixed train, that is, by attaching a passenger coach to une of its freight trains. Testing the alleged unreasonableness of the order in the light' of the inherent duty resting upon, the corporation, it follows

“ Indepeiidently of the provisions of the lease, which was a contract between the lessor and the lessee companies, the right of the people to insist upon the running of a separate passenger train is implied from the charter obligation to equip and operate the road. Inasmuch as a railroad company is bound to carry both passengers and freight, the obligation of the appellee required it to furnish all necessary rolling stock and equipment for the suitable and proper operation of the railroad as a carrier of passengers, no less than as a carrier of freight. It cannot be said that the carriage of passengers in a car attached to a freight train is a suitable and proper operation of the railroad, so far as the carriage of passengers is concerned. The transportation of passengers on a freight train or on a mixed train is subordinate to the transportation of freight, a mere incident to the business of carry

The contention’ that the order is unreasonable in and of itself, irrespective of whether there1 is profit in the operation of the train service which the order commands to be operated, because it directs the movement of the passenger train directed to be run to the state line, where, it is said, there are no terminal facilities, and no occasion for the termination1 of the transit) is disposed of by the considerations previously stated.. We say this because its unsoundness is demonstrated by the reasoning which has led us to conclude that there was no merit in the contention that the fact of pecuniary loss was of itself alone adequate to show the unreasonableness of the order. This follows,, from the principle which we have previously expounded to the effect that, the criterion to apply in a case like this'is the nature and character of the duty ordered

2. That the order was void because it operates a direct burden upon interstate commerce.

To support this proposition it is urged that the charter of the Interstate Railroad Company, the builder of the branch, provided for a road not only in Kansas but to extend into Texas and Missouri, and therefore for an interstate railroad. This being its character, the argument proceeds to assert that the regulation of traffic on the road, whatever be the nature of thé traffic, was interstate commercé and beyond the control of the State of Kansas. But this simply confounds the' distinction between state control over local traffic and Federal control 'over interstate traffic. To sustain the proposition would require it to be held that the local traffic of the road was free from all' governmental regulation, unless at the .same time it were held that the incorporation of the road had operated to extend the powers of the Government of the United States to subjects which could not come within the authority of that Government consistently with the Constitution of the United States. Manifestly, the mere fact that the charter of the road contemplated that it should be projected into.several States did not change the nature and character of our constitutional system and therefore did not destroy the power of Kansas over its domestic commerce or operate to bring under the sway of the United States matters of local concern and of course could not project the authority of Kansas 'beyond its own jurisdiction. The charter therefore left the road for which it provided subject as to its purely local or state business to the authority of the respective States into which it was contemplated the road should go, and submitted the road as án entirety, so far as its interstate commerce business was soncerned, to the controlling power conferred by the Constitution upon the Government of the United States.

The contention that a burden was imposed upon interstate

Affirmed.