Charleston Mail
THE TWO-CENT LAW DOES NOT APPLY TO THE COAL & COKE
RAILROAD
JUDGE BURDETT HANDS DOWN HIS OPINION IN CASE THIS
FORENOON
June 8, 1909
Prayer of the Coal & Coke Railroad Granted and Attorney General Conley and Prosecuting Attorney avis Are Enjoined From Enforcing the Two-Cent Rate Against This Railroad - Opinion a Long One and is Given in Full Below.
In a decision handed down this morning in circuit court, Judge S. C. Burdett grants the prayer of the Coal and Coke railroad, asking that Attorney General Conley and Prosecuting Attorney Avis of Kanawha county be enjoined from enforcing the two-cent fare laws - Act of Legislature of 1907 - as to the Coal and Coke railroad. The opinion which is given below in full, is a lengthy one, covering 2 pages of typewritten matter. The opinion follows:
On February 20, 1907, there was passed by the Legislature of West Virginia the act known as the "Two Cent Rate Act." See Acts of 1907, Chapter 41. There are but three sections in the act, and it is as follows:
"Sec. 1. That all railroad corporations organized or doing business in this state under the laws or authority thereof shall be limited in their charges for the transportation of any person with ordinary baggage, not exceeding one hundred pounds in weight, to the sum of two cents per mile, or fractional part of a mile, but the fare shall always be made the multiple of five nearest reached by multiplying the rate by the distance, and if for any one passenger the rates herein provided shall be less than five cents, the said sum of five cents may be charged as a minimum; children under twelve years of age shall be carried for one-half fare above prescribed; provided, that any passenger boarding a train at a station where tickets are sold, without having procured a ticket, may be charged an additional fare of ten cents, for which sum a rebate slip, redeemable in money upon presentation to any ticket agent of the company, shall be issued and delivered to such passenger; and provided, further, that nothing in this act shall apply to any railroad in this state under fifty miles in length and not a part of or under the control, management or operation of any other railroad, over fifty miles in length, operating wholly or in part in the state.
Sec. 2. Any railroad company which shall charge, demand or receive any greater compensation for the transportation of any passenger than is authorized by this act, shall be fined for each offense not less than fifty dollars nor more than five hundred dollars; provided; that nothing contained in this act shall apply to electric lines and street railways owned or operated in this state.
Sec. 3. All acts or parts of acts inconsistent herewith are hereby repealed."
The act went into effect on May 21, 1907. Prior to the passage of this act, passenger traffic in this state was regulated and governed by Sec. 82c, of Chapter 54 of the Code, under which railroads were classified according to gross earnings, and maximum rates for were prescribed, according to a classification based upon annual earnings per mile. The power of the legislature to regulate rates and to control by legislation passenger and freight rates is now recognized by the decisions of the courts of last resort of the different states, and has been upheld in this state by judicial authority since the case of Railroad Co. vs. Transportation Co., 25 W. Va. 324. The act of 1907, it will be seen, has very drastic penalties, providing a fine for each offense of not less than fifty dollars nor more than five hundred dollars, and there can be little question that the sale of each ticket and the collection of each fare where more than the rate prescribed by the act is charged, would constitute a distinct offense. If, as is shown in plaintiff's brief, and by the record showing the passenger business of the plaintiff, a contest should be made for the violation of this act, in the event of the failure of the courts to sustain the contention of the plaintiff, fines so excessive would be adjudged against it that it would be too hazardous for any business organization to attempt that mode of contesting the law. Hundreds of offenses would in that event occur each day and the maximum fine imposed in each would in a short time take the plaintiff's property, or at least a considerable portion of it.
In overruling the demurrer to the bill it was of necessity held that equity could in a proper case enjoin the officers of the law from enforcing an act of this kind if the contentions of the plaintiff are maintained. It is the application of the fundamental rule of equity that where the pursuit of a legal remedy would be onerous, burdensome and very expensive, or where a mulwtiplicity [sic] of suits would be the inevitable result, or where the pursuit of the legal remedy would subject the party to too great a hazard, then equity will stay the hand of the law till the rights of the parties shall be determined.
See Ex Parte Young, 209 U. S. 27
Smith vs. Ames, 169 U. S. 466
183, U. S. 79.
Babier v. Connolly, 113 U. S. 27.
And the same principal was involved in the recent cases decided by the Circuit Court of the United States for the Fourth Circuit, involving the enforcement of the North Carolina railroad laws, the principles of which were admitted in argument, though a report of the cases was not produced on the trial.
In the case at bar the plaintiff corporation has obeyed the act of the Legislature since it went into effect, and finding that the Attorney General of the State and that the Prosecuting Attorney of Kanawha County could institute proceedings against it for any violation of the said act of 1907, should it violate the same, it filed its bill in this case. The bill seeks to enjoin the Attorney General of the State and the Prosecuting Attorney of Kanawha County from enforcing against the plaintiff the said two cent rate in any manner. The principal facts alleged in the bill are that the plaintiff is a railroad corporation chartered under the laws of West Virginia and that it owns a railroad lying wholly within the State of West Virginia extending from the City of Charleston to Roaring Creek Junction, near Elkins, in Randolph County, passing through the Counties of Kanawha, Clay, Braxton, Gilmer, Lewis, Upshur, Barbour and Randolph, in the State of West Virginia. The road is about 185 miles in length consisting of about 63.3 miles of old road, built by the Charleston, Clendenin and Sutton Railroad Company, running from Charleston to Otter, 105 miles of new road running from Otter to Leiter, and 17 miles running from Belington to Mabie, known as the Roaring Creek and Belington railroad, operated under and between the plaintiff and the Davis Colliery Company. The actual cost of building the railroad representing the investment of the plaintiff, as charged in the bill, is $7,561,048.26. The plaintiff has outstanding the following securities: 5 per cent non-cumulative preferred stock $8,881,800.00; common stock $10,000,000.00; 5 percent bond $3,030,000.00; old bonds of C. C. & S. R. R. $30,000.00; Car Trust bonds $467,000.00; bills payable $2,400,649.25. It alleges its fixed charges at $378,459.86. It further alleges that prior to the passage of the act in question the company was charging about three cents per mile for the transportation of passengers and that it was a reasonable charge; that it has conformed to the act in question so as to give it a fair trial and finds that while the passenger fare for the year ending June 3[0], 1906, amounted to $115,478.86, and for the year ending June 30, 1907, amounted to $133,665.81, yet for the ten months ending April 30, 1908 while the two cent fare law was in operation and it was working under the same, its passenger fares amounted to only $99,251.67; that its gross earnings for the year ending June 3[0], 1907 were $773,395.96 and for the ten months ending April 30,1908, its gross earnings were $685,200.06; and that its total operating expenses including taxes, for the year ending June 30, 1907, were $668,809.16 and for the ten months ending April 30, 1908, were $623,334.33. It is alleged and there is no contradiction of the allegation, that the railroad is built through a mountanous [sic] and for the most part, a sparsely settled country, and that owing to the prevalence of tunnels, bridges, side cutting fills and culverts the road was expensive to build and that owing to the frequency of slips and slides and other natural conditions to be contended with, it is expensive to maintain the road bed in safe condition. It is alleged that even at the old rate of three cents per mile, trains on this road were operated at a loss which is understood to mean that the road would be in better conditions financially if it could operate solely a freight service and not run passenger trains. In short, the allegations of the bill are that the effect of the two cent rate law has been and is to reduce its already small earnings so that after paying its operating expenses it has no adequate income for the investment in its railroad.
The defendant, the Attorney General and the Prosecuting attorney of Kanawha county, have presented their contention in support of the law with commendable ability and clearness, and have indeed gone beyond the customary routine of public officials in presenting their defense and in their effort to sustain it and to uphold the law. Their answer presents the following propositions:
It denies that the cost of the road is as alleged and avers that the value of the road is only $3,500,000.00. They call for proof of fixed charges; deny that the old rate of three cents charged by the plaintiff was a reasonable rate; deny that the new act materially and seriously injuries the plaintiff's earnings from passenger fares; deny that the plaintiff's experience under the two cent law is at all controlling, because, during the tests made there have been hard times. They deny that the plaintiff's railroad has been economically operated. Further, that it was not judiciously located from a business stand point and that the purpose of building the road was to develop and enchance [sic] the value of large boundaries of coal and timber lands owned by the plaintiff and its officers and its stockholders; and deny that it costs the plaintiff more than two cents a mile to transport its passengers. They contend that in determining the reasonableness of the two cent rate the passenger traffic should not be considered alone, but the entire traffic of the plaintiff. They further allege on behalf of all citizens and taxpayers that the act of 1907 repealed former le[g]islation on the subject of rates, and that if the present act shall be held to be unconstitutional and void that the traveling public will have no protection against unjust rules, and they therefore pray for an injunction against the plaintiff from restoring former rates and from charging unreasonable rates.
There was a replication to this matter and may be said that the pleadings present the following questions:
First: Whether or not the act of 1907 conflicts with the Constitution of the United States or with the Constitution of West Virginia.
Second: Whether or not said act, if enforced against the plaintiff, deprives it of any property right, privilege or immunity or the equal protection of the laws guaranteed by the Constitution of the United States or of this State; and
Third: Whether or not the enforcement of the two cent rate, as against the plaintiff, so reduces its revenue that it amounts to a taking of its property without due process of law, or, in other words, confiscates such property.
I am confronted at the threshold with a proposition that I decide with great hesitation. It is the validity of the act of 1907, upon its face, without inquiring into its operation upon any particular railroad. The act exempts from its operation all railroads in the state "under fifty miles in length and not a part of or under the control, management or operation of any other railroad, over fifty miles in length, operating wholly or in part in the state." In other words, the act attempts to divide railroads into two classes: The one fifty miles and over in length and the other, under fifty miles in length. The first class is regulated by the act and is held to a two cent rate. The other class is left in the doubtful position of having no regulation at all, or of being under the regulation provided by Sec. 52c [sic] of Chapter 54 of the Code. The act of 1907 repeals all acts or parts of acts inconsistent with its provisions. Sec. 1 of the act of 1907 has the proviso: "That nothing in this act shall apply to any railroad in this state under fifty miles in length," &c. It may well contended that the act of 1907 repeals Sec. 82c of Chapter 54 of the Code, thus leaving railroads fifty miles in length and under, which usually have in the very nature of the purpose of their construction, a monopoly of the passenger and freight traffic in their regions, without any regulation whatever. On the other hand, if Sec. 82c of Chapter 54 be not repealed by the act of 1907 as to railroads under fifty miles in length, then the legislative intent is that the act of 1907 applies to the first class; that is, to railroads fifty miles and over in length and Sec. 82c of Chapter [54] applies to railroads under fifty miles in length. The act of 1907 makes no distinction between standard gauge and norrow gauge railroads, while Sec. 82c of Chapter 54, in classifying railroads by annual earnings per mile, makes a distinction between these two different kinds of railroads. The act of 1907 likewise exempts electric lines and street railways, while Sec 82c of Chapter 54 of the Code exempts only city or street railroads and those other roads whose length does not exceed six miles. In making the exemption of six miles in the act of 1872-73, which is said Sec. 82c, the legislature could with propriety do so, for the reason that a road having the small trackage of six miles could well be considered of such small concern as not to need any regulation whatever, and the other small railroads which would appropriate its importance, say one having ten or twelve miles, would have no great cause to complain because its rate would be fixed according to its earnings. The right and power of the legislature to control and regulate railroads and other means of public travel is well settled upon principles too familiar to need discussion, and all such legislation based upon fair and equitable principles and which deal with all alike, meets with hearty approval. The shippers and travelers in the state are as much entitled to reasonable and just rates as the railroads and other investors are entitled to the equal protection of the laws and to security against confiscatory legislation; but the Judge who passes upon legislation of this character must recognize that there are constitutional limitations even upon the power of the Legislature.
For the purposes of taxation or for any other legitimate purpose, the state may divide corporations into classes, and in matters of taxation may discriminate between classes (Cooper v. Scherr, 50 W. Va. 551), and all such legislation dealing fairly as to classification has been held not to infringe upon the Fourteenth Amendment to the Constitution of the United States. I understand the doctrine to be the Fourteenth Amendment simply demands that the same means and conditions be applied impartially to each class, so that the law shall operate equally and uniformly upon all persons in similar circumstances. Brannon, Fourteenth Amendment, p. 323. The case of Cooper v. Scherr, above cited, is one of a class of cases in which the court is dealing with the subject of taxation, which is a matter peculiarly and exclusively with the judgment of the legislature; and, moreover, that case applied the well known principles of law which govern when a satte [sic] is dealing with its own corporations created under its sovereign power. The state having power to grant corporate life can grant it upon such terms as it may see fit to make, and in imposing license tax or other tax upon such corporations it has only to keep in view the rule that if it makes clasess [sic] it shall deal with all of a particular class alike; but even where the power of the state is so far-reaching, as in the matter of taxation, the state legislature cannot classify upon unreasonable, arbitrary or needlessly unjust grounds. Any distinction in corporations, even for the purposes of taxation, must be one based upon a reason, and must not discriminate. Raymand v. Chicago U. T. Co., 207 U. S. 20. It could not classify them by names, nor by the particular county in which they may operate, nor by any other classification that would shock the conscience or show a clear disregard for the customary and ordinary principles of taxation. The state can arbitrarily and according to its own interests, tax some class of corporations and not others. It can consult its own interests and distinguish between privileges, franchises and licenses on the one hand, and fixed and tangible property on the other, and between real and personal property; it can go even further in tax legislation without infringing upon the Fourteenth Amendment. The only thing required is that in making classifications the same shall be made upon some reasonable ground and the law shall operate upon all persons in the same class alike, and that each shall be given the equal protection of the laws, and that the legislation be not subject to the criticisms of depriving any one of his property. See 50 W. Va. 551, 552. I think, however, that there is a distinction, if ti were necessary for the purposes of this case, to make it between cases where classifications are made of corporations for the purposes of taxation and those cases in which the legislation in question attempts to classify persons and corporations for the purpose of regulating rates for public service. Be that as it may, there can be no question in my mind that any classification of property of railroads or other means of public travel, or of public utility, has some clear, well-defined limitations upon the legislative power which can not be infringed upon without violating the federal constitution. In Magoun v. Illinois, 170 U. S. 283 (quoted by Judge Poffenbarger in Cooper v. Scherr, supra,) it was said: "It is apparent that the mere fact of classification is not sufficient to relieve a statute from the reach of the equality clause of the Fourteenth Amendment, and in all cases it must appear, not merely that a classification has been made, but also that it is based on some reasonable ground - something which bears a just and proper relations to the attempted classification, - and is not a mere arbitrary selection." There is therefore no fixed principles for the application. See also Gulf Co. v. Ellis, 165 U. S. 150; Bell's Gap Railroad v. Pennsylvania, 134 U. S. 232; Cooley's Cons. Lim. P. 485, lays down the principles as follows: "Equality of rights, privileges and capacities unquestionably should be the aim of the law; and if special privileges are granted, or special burdens or restrictions imposed in any case, it must be presumed that the legislature designed to depart as little as possible for the fundamental maxim of government."
In the case of Dow v. Beidelman, 125 U. S. 680, and in some other cases cited in that opinion, the power of the legislature of a state to fix rates was upheld. In the principal case, the act of the Legislature of Arkansas of April 14, 1887, dividing railroads into three classes, to-wit, the first, fifteen miles in length, the second, lines over fifteen miles and less than seventy-five miles in length, and the third, lines over seventy-five miles in length, was upheld as not infringing upon the Fourteenth Amendment. In reading this opinion and comparing it with the language used in Stone v. Farmers Loan & Trust Co., 116 U. S. 325, and Magoun v. Illinois, 170 U. S. Supra, one cannot fail to recognize on the one hand the force of the position that the Supreme Court has already decided that a classification by the length of a railroad line has been upheld; and on the other hand the equal force of the position that any classification must be made upon grounds that are not arbitrary but reasonable. The Arkansas statute involved in the case of Dow v. Beidelman, so far as the opinion shows, makes no exceptions as to the different kinds of railroads; that is, electric lines, narrow gauge, standard gauge, interurbans, and even street railways, seem to come within the purview of the act passed upon in that case. In West Virginia, prior legislation and the present act, even if two were not authorized to pursue the investigation under the broader scope of judicial knowledge, tells us that the state must deal with inter-state lines traversing it from east to west, north to south, with purely intra-state lines of different lengths and importance with coal railroads, lumber railroads, standard gauge railroads, narrow gauge railroads, street car lines, inter-urban lines, electric railroads and tram railroads. These vary in length from six miles, (confining ourself to legislative knowledge) and from less (going to the field of judicial cognizance) to hundreds of miles in length. The history of the country and the rapid railroad development since 1888, when the decision in Dow v. Beidelman was rendered, make it clear that, by the general term, "railroad," is not meant alone lines operated by steam power, for there are many lines which were operated wholly by steam in 1888, which are now operated by electricity. Many railroads are now even considering the advisability of operating a great part of their systems by electrical power. If, therefore, any force is to be given to the warning note in Stone v. Trust Co., 116 U. S. 325, and in Magoun v. Illinois, 170 U. S., to the effect that classification must be upon reasonable grounds, we are bound to read the case of Dow v. Beidelman in the light of the special legislation with which it dealt, and consider the legislation now before the Court in the light of the situation that presents itself in this state. If a steam railroad one hundred miles in length must operate at two cents a mile, and an electric line one hundred miles in length, doing the same kind of business, be not so regulated, and if an electric line be within the probabilities of modern railroad development, such a classafication [sic] as the present one does not strike one as being either reasonable or fair. If narrow gauge railroads were in 1872 and 1873 of the relation to standard gauges as then indicated by the act of the legislature, it seems indeed strange that in 1907 this class of railroad property should be put on the same footing with standard gauge railroads. The act of 1907 differs from the Arkansas act passed upon in Dow v. Beidelman in another particular, to-wit, in the latter there was no exemption from the operation of the act. The Arkansas act divided railroads into three classes and put all of them into its proper class, fixed by length of lines. It seems to have excepted nothing. The act of 1907 of the West Virginia Legislature excepted railroads under fifty miles in length, whether or not such smaller railroad was a narrow gauge, electric line, coal road or lumber road. The importance of the line, the territory through which it ran, its earning capacity - were not considered, - nothing but length of line was taken into consideration. The act then excepted from its provisions electric lines and street railroads, so that if modern economics should make it convenient for one of the great trunk lines to electrify its system, it would be, as a result of such change, without regulation. It the act of 1872-73 (Sec. 82c of the Code) be repealed by the act of 1907, then not only such trunk line so electrified, but all lines under fifty miles in length would be in no regulated class and would be entirely without regulation. The Arkansas act regulated all railroads in the state, and the Supreme Court held that nothing appeared to so stultify such a regulation as to bring it within the prohibition of the Fourteenth Amendment. We are asked to so construe that holding as to uphold a statute which does not pretend to regulate in any way whatever a great part of the railroad systems of the State; which indeed pretends to make regulations but in fact exempts from regulation lines which are now a large factor in the commerce of the state, and with the extension of electrical power some of the greatest railroads in the state may, under this classification easily become exempt from the provisions of the act. A line, say, from Charleston to Huntington, would be exempt. One from Charleston to Parkersburg would be regulated. A line running from Wheeling to Fairmont would be exempt. One running from St. Albans, the mouth of Coal River, to the undeveloped territory of Boone and Logan Counties would not be exempt. We must know and keep in mind, as the evidence in this case clearly shows, that this is a state having mountains, gorges and mountainous streams, all to be mastered in the construction of railroads. Our principal cities are in the valleys. Our wealth of coal and timber, gas and oil, is, as a rule, in the mountainous sections. Railroad construction must consist of cuts, fills, culverts, bridges and tunnels. The railroads that are built must, as the evidence in this case shows, master these impediments of nature. In West Virginia, the length of the railroad is in no sense a determining factor in its capacity to earn money or in the cost of carrying passengers. But for the great weight of any ruling of the Supreme Court of the United States Supreme Court, I would not hesitate to hold that in West Virginia a classification by the length of the lines of railroad, without reference to the motive power, the earning capacity, the character of the railroad, whether standard or narrow gauge, or the number of passengers that could be or ought to be carried, would be a most unreasonable classification. But I would not, in dealing with this subject, depart from the principles laid down in Dow v. Beidelman, whatever might be my own knowledge of the conditions in this state or the facts proved, if the legislation involved were the same. But, in my opinion, the Arkansas statute an the West Virginia statute are entirely different in principle. The Arkansas statute regulates all railroads. The West Virginia statute regulates some and exempts such a considerable portion under like conditions and circumstances and at the same time repeals legislation which would regulate all railroads so that it may be callled [sic] more of an exemption act than of a regulating act. The Arkansas law regulated every railroad from one mile in length up and fixed a rate of charge for each according to its respective class. The West Virginia act regulates certain lines according to length and exempts all others. It regulates certain lines operating by steam or other power, but exempts electric lines. It not only exempts all railroads less than fifty miles in length and all railroads of any length using electrical power, but leaves the roads so exempted from the operation of the act of 1907 without any regulation whatever, free to extort or demand any unreasonable charge for carrying passengers. Any narrow gauge railroad, whose character and importance has, by former legislation been held to be of less concern because of its inability to handle the amount of traffic that a standard gauge railroad can handle, is put upon the same footing with a standard gauge railroad. Therefore, it is apparent that, in the light of former legislation, the evidence in this case and the judicial knowledge properly applicable to the situation in hand, the case of Dow v. Beidelman is not controlling and in my judgment, without conflicting with the holding in that case, and upon the authority of Magoun v. Illinois, 170 U. S., and Cooper v. Scherr, 50 W. Va., it is proper for the courts to inquire whether or not the legislation in question is a classification made upon reasonable grounds and comes within that category of class legislation which denies to persons the equal protection of the laws.
Another manifest distinction between the West Virginia act and the Arkansas law passed upon in Dow v. Beidelman is that the former exempts from the operation of the act railroads under fifty miles in length when the latter are "not a part of, or under the control, management or operation of any other railroad, over fifty miles in length, operating wholly [or] in part in the state."
What is the meaning of this clause? Does it mean that forty-nine miles of railroad in the hands of one corporation is regulated as to charges, and in the hands of another corporation is entirely exempt from regulation? In my judgment, it means that any railroad under fifty miles in length may charge any rate of fare that it sees fit as long as such railroad is not a part of and not controlled, managed or operated by another railroad over fifty miles in length. Observe, too, that there is a change of base in legislative intent in not observing the former classification of fifty miles and over in length and under fifty miles. If the clause in question were consistent with the other classification attempted to be made by this section, instead of the words "over fifty miles in length," above quoted, it should read, "fifty miles and over in length." To make myself clear if a railroad were exactly fifty miles in length it is held to the two cent rate under Sec. 1 of the act of 1907. However such a railroad could manage to operate another railroad under fifty miles in length, and the latter would not be compelled to limit its charges to two cents; in which event such fifty miles railroad would be regulated on one part of its system and not on the other. Viewed from another standpoint, all railroads over fifty miles in length must be limited to two cents a mile on their main lines and upon all lines which they control, manage or operate. If the plaintiff in this case should sell its seventeen miles running from Belington to Mabie, known as the Roaring Creek & Belington Railroad, to another railroad line under fifty miles in length, the latter could, at once, without violating any law, disregard the two cent rate regulation. In other words, what can be charged over the Roaring Creek & Belington Railroad, depends entirely upon who and what controls, manages or operates it. Again, a railroad fifty miles and under in length can purchase the stock of one or more other lines fifty miles and under in length and can operate manage and control them without being subjected to the regulations of the West Virginia act. Such small line could have many other smalller [sic] lines that might make its trackage equal to or more than that of the plaintiff and yet be not subject to the provisions of the act. In other words, the charges on any given line of railroad under fifty miles in length depend upon what railroad controls, manages or operates it, and under this act a line of railroads fifty miles and under in length may acquire other lines, till its mileage equals or exceeds that of the plaintiff, and yet such smaller railroad with its additional lines would not be held to the two cent limit, while the plaintiff would be. I, therefore, find that the legislation in question is subject to the following valid criticisms:
First. That it attempts to classify railroads by length of mileage, which, under conditions in this state, is very unsatisfactory, and bears little relation to cost of construction, cost of maintenance and cost of carrying passengers.
Second. That it makes no distinction between narrow gauge and standard gauge, or any other physical condition or impediment that confronts railroad construction and maintenance.
Third. That it exempts from its provision electric railroads without any reference to mileage, and these railroads may become, and in some sections have already become, competitors with steam railroads.
Fourth. That, instead of classifying railroads by some reasonable system, it in fact regulates a part of the railroads of the state and exempts from its provisions a great part of the railroads of the state, thus leaving the latter without regulation and free to extort and demand from the people any kind of rates that these railroads may demand. This criticism carries the greater force when it is considered that the great trunk lines in this state are inter-state carriers, such as this court can judicially known and name, like the Pennsylvania, the Baltimore and Ohio, the Chesapeake and Ohio, the Norfolk and Western, and the Virginian. These trunk lines cannot go far from a just rate because of national regulation and the publicity which those regulations enforce, but with the smaller railroads in this state, not coming under national supervision, the regulation of this act is the stone rather than the bread offered to the people.
Fifth. The last clause of the first section of the act is a discrimination under which the ownership of the railroad under fifty miles in length, or its control and management, determines the rate to be charged, or whether or not it is regulated by the act or exempt from its provisions.
Sixth. Under this last clause of section 1, railroads fifty miles in length and under may acquire, control, manage and operate as many lines under fifty miles in length as it may see proper, and this combined mileage, although over fifty miles in length and equal to or greater than that of the plaintiff, is exempt from the operation of a law which purports to regulate railroads.
In my judgment, the above criticisms are enough to condemn the act, and I have found no case which causes me to hesitate in declaring the above act, for the foregoing reasons, void, because it is an unreasonable, unjust, discriminating piece of class legislation which denies to the plaintiff the equal protection of the laws, except the case of Dow v. Beidelman, supra; but, as before stated, I am convinced that the last case is easily distinguished from this, and that, when it is read in the light of the subsequent holdings of the supreme court, it does not validate such legislation as the act now under consideration.
For reasons heretofore given, I am convinced that the legislation of 1907 deprives the plaintiff of the equal protection of the laws and should not be enforced. I do not mean to hold that the legislature cannot classify railroads by the length of their railroads, putting all under similar conditions in the same class. I only mean to hold that the particular legislation in question, in regulating a part of the railroads and exempting a part, is class legislation. So much and no more. I am loathe to make such a holding, and have come to this conclusion only after long and careful deliberation and a sense of the highest duty.
A circuit judge of a state should approach a question involving the constitution of the United States with the greatest caution and the highest sense of responsibility; but I am bound to pass upon this question. If this law shall be upheld by the state courts, the plaintiff has a right under the judiciary act of congress of an appeal to the supreme court of the United States from the decision of the court of last resort in this state. I cannot escape my duty in declining to pass upon this question. Its determination is involved in this case, and my decision is only the first step in a case which may finally reach that court of last resort in the nation whose opinions justly deserve respect and obedience from every citizen of the land. But because some other court may review my conclusions, I must not shirk the question; and I can only say that I have given to it all the time and all the faithful conscientious consideration which my exacting duties on the bench will permit of.
The penalties involved in the enforcement of the act of 1907 against a railroad that sells thousands of tickets a day, week or month, bring it so clearly within the case of Ex parte Young, 209, U. S. 123, that in my judgment the jurisdiction of either state or federal court to hear and determine the questions here involved is beyond question. I have gone into the question involved in the position of the plaintiff, contested by the defendants, that the rates prescribed by the act of 1907, as applied to the plaintiff, will involve practical confiscation of its property. Inasmuch as I have decided upon the grounds already given to grant the injunction prayed for, it would be a waste of time to go into a detailed discussion of the evidence on the question of confiscation. Counsel upon both sides have presented the case so clearly in oral argument and by brief that I have had no serious trouble in arriving at some well defined views from this evidence. It was not seriously denied in argument, and could not be, I take it, from the authorities cited, that a rate which does not allow a fair remuneration for the services rendered, or certainly which will take plaintiff's property and devote it to the public service without remuneration, is void because it deprives the plaintiff of its property without due process of law. Railroad Co. v. Gill, 156 U. S. 649; ex parte Young, 209 U. S. 123; Smith v. Ames, 169 U. S. 466. Two views of this question are presented. It is ably contended by the defendants that in determining the return which should be made under law to the plaintiff there must be taken into consideration every element of profit and earnings of the entire business of the plaintiff. In other words, isasmuch as it appears here that the plaintiff owns real estate, that the enhancement of this real estate is a source of revenue and must be considered. In my judgment this view is untenable. There is no way to pursue such an inquiry with any hope of getting satisfactory results. Any tram road, narrow gauge road, electric line, steam railroad or other means of transportation projected and built into a section of country may enhance values, but how, to what extent, how to capitalize it, how to estimate it, are matters that involve speculation, and strike every mind probably in a different way. If the investigation of the question of the confiscation of property by so reducing a rate for public service as to render the property valueless, shall every approximate certainty, we must deal with the returns in the shape of receipts as offset by expenses and charges and cannot complicate the question with the enhancement of values of real and other property to the stockholders or to the railroad, except as it may enhance the power to earn upon the investment. We mich as well say that by extending the railroad a few miles further into a city, thereby the importance of the railroad and its value are enhanced, and this enhanced value of the railroad should be taken into consideration in dealing with the bare question of the income of the railroad. There might be cases where such a calculation could be made, but it does not so appear in this case; and I am inclined to the view that my investigation should extend to the receipts and the outgo, and the present value of the railroad, its stock and bonds, the original cost of construction and the probable earning capacity under the rates prescribed and the fair operating expenses; and, from these considerations, determine the important question whether or not, as applied to the plaintiff, the two cent rate has deprived or is depriving it of property to rights guaranteed to it by the constitution of the United States or of this state. Smith v. Ames, 169 U. S. 466. It is also ably and very forcibly contended by the defendants that the entire income of the railroad should be considered, and that for the purposes of this case, the court should not inquire into passenger rates, passenger income and passenger expenses alone, but should show that the passenger business is conducted at a loss. Before looking into the law of a question it is well to get firmly fixed in mind the principles of justice which control it. Statutes should be just. The representatives of the people do not represent them unless they keep the principles of justice and the preservation of property rights as the constant guide. The people have a right to demand that there shall be no extortion in either passenger or freight rates. Shippers and travelers have the right to demand that public agencies, like railroads, shall not feast and fatten from these great public franchises that are granted out of the sovereignty of the people purely for the use and convenience of the public. Conformable to this reasonable and just demand of travelers, shippers and the public, there has been a pressing demand upon legislators and congress to regulate in some way passenger and freight rates, but there is no demand for confiscation or for injustice. The law in question in this case does not pretend to deal with freight rates. That question is left to other statutes is intended to limit passenger rates along. Besides, it is so out of harmony with that principle of justice which should guide legislative bodies in dealing with any subject under its control, to desire that any service shall be rendered at a loss or without compensation that, if the question were new, one would be surprised to find the courts announcing such a doctrine without strong, pressing reason therefor. It is true that it has been held that a railroad commission can compel the operation of a particular passenger train, even though that train may be run at a loss; but here the question is, can a railroad be compelled to run its entire passenger service at a loss. I think not, and would hold that the true rule is that, in determining the question involved in this case, I must look alone to the passenger service, its income under the two cent rate, and its fair proportion of expenses to be determined like any other business question. In determining the cost of any business, there are complications and necessarily some uncertainty. Just what part of the cost of a wholesale business should be charged to the sales department or to the shipping department, or what part of a manufacturing business should be charged to the soliciting department, are all questions involving calculation, and, of course, such figures can be juggled. As was said by Chief Justice Marshall: "Questions may occur which we would gladly avoid, but we can not avoid them. All we can do is to exercise our best judgment and conscentiously [sic] perform out duty."
It has been held that the question of the insufficiency of a rate is one for the courts. It is a question of fact. If the courts then shall say that the question is too hard of solution and that no satisfactory mode of determining the question can be arrived at, then there is the anomalous condition of a right protected by the constitution of the United States and no way known to mortal man of protecting that right. Because the question is hard of solution, because experts adopt different methods of calculation, because each method may involve some element of uncertainty that, alas! Every calculation of weak humanity must encounter, is no argument for denying to any person the equal protection of the laws or taking his property without due process of law. I am convinced that the evidence in this case discloses that the plaintiff's passenger business under the two cent rate is run either at a loss or at such a low remuneration that it practically amount to a taking of its property.
I think that any fair calculation, by any system that may be adopted, will bring one to this conclusion. Being so convinced, I so hold. I further find that taking the passenger and freight receipts together, the reduction in the passenger rates caused by the operation of the two cent rate law passed in 1907, is such a reduction of the receipts of the plaintiff as to amount to a taking of its property in a way that is prohibited by the federal constitution.
To review this evidence in a written opinion would extend beyond all reasonable length and would be of no use to any one.
I satisfy myself by deciding the general principles upon which my opinion is based and do not enter upon a discussion of the details of the evidence.
I think that the decisions cited and the case of St. L. R. R. v. Hodley, decided May 20, 1909, (Fed. Reporter, Vol. 168, No. 2) announce the safe rule that all things should be considered and that net earnings which may be found only with a microscope do not satisfy constitutional requirements.
The relief prayed for is granted and a decree enjoining the enforcement of the act of 1907, will be entered.
The cross-relief prayed for by defendants, I cannot deal with now. When an unreasonable rate shall be put in force, there may be grounds for relief against it, in a proper case. But I cannot assume that the plaintiff will promulgate an unreasonable rate, and therefore will not now decide the right of these defendants to ask for an injunction against such a rate.