Hackworth v. Missouri Southern Railroad

I dissent from the conclusion reached in the foregoing opinion, and hereby adopt as my own the opinion of Mr. Commissioner WHITE delivered in Division Two. Said opinion is as follows:

The plaintiff, executrix of the will of B.F. Hackworth, deceased, brought this suit for alleged overcharges which the defendant collected from B.F. Hackworth for the shipment of ties over its road. The petition contained 748 counts. Plaintiff dismissed as to fifteen counts, and recovered judgment on the remainder, amounting in the aggregate to $10,572.36. The amount prayed for in each count of the petition was the amount charged in excess of the rates provided by Section 3241, Revised Statutes 1909, and collected by the defendant for a particular shipment of ties.

After a general denial, the defendant for answer averred that the charge alleged to have been collected for services rendered by the defendant were reasonable and proper, and that the rates prescribed by Section 3241 were in violation of several enumerated sections of the Constitution of the United States and of the State of Missouri, in that they operated as a confiscation and deprived the defendant of its property without due process of law.

Defendant further set up the five-year Statute of Limitations in defense of 127 counts of the petition; also the three-year Statute of Limitations, Section 1890, Revised Statutes 1909, as to all the counts of the petition, in that the action was for penalties.

The plaintiff, in reply to the pleas of the Statutes of Limitations, alleged that before the charges were collected an injunction was granted by the United States Circuit Court of the Western District of Missouri in favor of certain railroads in the State of Missouri, whereby the Railroad and Warehouse Commissioners and the Attorney-General of the State of Missouri were restrained from enforcing the provisions of Section 3241, Revised Statutes 1909, and that such injunction remained in force until the judgment was reversed by the Supreme Court of the United States in 1913, and during that time the plaintiff was unable to sue and the Statutes of Limitations did not run.

The defendant's road did not exceed forty-five miles in length until May, 1909, when it was extended to the length of fifty-four miles of main line, besides branches, etc. At that time the rate act, including Section 3241, was in force. By the extension in 1909 the defendant's railroad was brought within Class C, as defined by Section 3231, Revised Statutes 1909, so that the rates provided by Section 3241, Revised Statutes 1909, were applicable to the traffic on defendant's road. The aggregate amount sued for in the 127 counts to which defendant seeks to apply the five-year Statute of Limitations was $1401.19. There was a judgment on all counts except those dismissed. Seven of the fifteen dismissed were among those to which the five-year Statute of Limitations was pleaded, leaving 120 counts in which that issue was joined. The defendant appealed from the judgment. The facts in record as they pertain to the different points presented will be considered in their order.

The records of the proceedings of the Federal Circuit Court, pleaded in plaintiff's reply, was not introduced in evidence, but this court may take judicial cognizance of it as a matter of current history. [State ex rel. v. Public Service Commission,259 Mo. 704, l.c. 726; St. L. S.F. Ry. Co. v. Hadley, 168 F. 317; Missouri Rate Cases, 230 U.S. 474.]

I. The plaintiff relies upon the case of State ex rel. v. Williams, 221 Mo. 227, in support of her position that the Statute of Limitations did not run because the plaintiff could not sue the defendant in this case while the injunction in the Federal court remained in force. A suit wasLimitations. brought by Mr. Jones, the Circuit Attorney of the City of St. Louis, against certain railroads that were parties to the proceeding in the Federal court, seeking to enjoin them from collecting fares in excess of the statutory rate. The defendants then began the proceeding in this court, State ex rel. v. Williams, to prevent by prohibition a prosecution of the injunction suit in St. Louis, and this court awarded a peremptory writ. The opinion expressly placed the ruling upon the ground that the parties to the two suits were the same; the parties to the suit in St. Louis, where it was sought to enjoin the charging in excess of the statutory rate, were the same parties in effect as the parties to the suits in the Federal court where the enforcement of the statutory rate was enjoined. Inasmuch as the Federal court had first acquired jurisdiction of the parties and of the subject-matter of the suit, which affected the constitutionality of the statute, this court would not interfere, but let the matter proceed to final determination in the Federal court. While the Attorney-General, and the Railroad Warehouse Commissioners, of Missouri, were the nominal parties defendant to the suits in the Federal court, those officials of the State represented the passengers and shippers whose interests or rights might be affected, so that the real parties in interest were shippers or passengers over any of the railroads involved, and the Circuit Attorney of Louis in the suit brought by him represented the same shippers and passengers. The opinion says, l.c. 254:

"Thus we have two cases in courts of co-ordinate jurisdiction where the power of the courts is being exercised betweenpractically the same parties in interest, to-wit, the carriers on one hand and the shippers and passengers on the other, upon the same subject-matter, and the two courts are thus brought in conflict with each other."

Plainer language could hardly be used by the court to show that the ruling was distinctly upon the ground of identity of parties. None of the parties to the present suit were parties to that injunction suit in the Federal court. The defendant railroad company was not a party, and, at the time the judgment was rendered in the Federal Circuit Court, it was not of sufficient length to bring it within the provisions of Section 3241, but was built to the requisite length in 1909. Not only that, the plaintiff here was not a party to that injunction suit, — the real parties there, represented by the officials were theshippers and passengers-over the railroads who were parties tothat suit; they were not shippers and passengers, as such, over the railroad of defendant in this case.

Appellant, however, claims that inasmuch as there was a judgment by a Federal court having jurisdiction, holding the statute unconstitutional, after that decree was entered, there was no statutory maximum-rate law in force in this State until the decree was reversed by the United States Supreme Court. This on the theory that the doctrine should be applied as laid down in several decisions; where a statute has been declared unconstitutional or constitutional by a court of last resort its constitutionality ceases to exist as an open question. [Schmidt v. United Order of Foresters, 259 Mo. 491, l.c. 497; State v. Finley, 259 Mo. 414, l.c. 422; Non-Royalty Shoe Co. v. Phoenix Assur. Co., 210 S.W. 37, l.c. 43; and cases of like import.] In those cases it was held no longer permissible to raise a constitutional question so as to confer jurisdiction upon this court. If that principle could be applied to this case, where the statute was held unconstitutional by the Federal Circuit Court, not a court of last resort, so that everybody would be bound by that decree while an appeal was pending in the United States Supreme Court (which we do not by any means concede), the issues determined in the railroad-rate case would not support the position. The rate cases, eighteen in number, were determined in one opinion. [St. Louis S.F. Ry. Co. v. Hadley, 168 F. 317.] The Federal Circuit Court in that case held, page 347, that the statutes, such as the one under consideration, "should be declared valid or void as the facts might warrant," and said, at page 348:

"Therefore the holding is that these statutes are not voidupon their face, and cannot be declared void for the one reason that the evidence shows they are not enforcible as to two or more roads." (Italics ours. And further, on page 352:

"This leaves but one question for decision and that question largely one of fact."

The court then proceeded to consider the evidence and held the statute to be confiscatory and unconstitutional because of the facts shown in regard to the investment and earnings of theparticular roads which were parties to the eighteen suits. When the case reached the Supreme Court, 230 U.S. 474-509, et seq., it held, under the facts, that the rate statute was not shown to be confiscatory as to some of the railroads, while as to others it was. None of those eighteen railroads relied upon a judgment in favor of any of the others as being conclusive. Each relied upon the ruling in its own particular case. Thus, according to the ruling in the Federal Circuit Court, as well as in the Supreme Court of the United States, Section 3241 is confiscatory or otherwise, constitutional or unconstitutional, not upon its face, but upon the facts shown and applied to a particular road. Otherwise, if the statute had been held constitutional upon its face by the Supreme Court of the United States so as to remove all questions as to its constitutionality, then the plaintiff in this case might have pleaded that judgment as settling once for all the question of the confiscatory or fair quality of the rates as applied to the defendant's railroad and there would be no necessity of inquiring into the facts in this case.

So we hold that the plaintiff might have brought his suit against the defendant at any time after the overcharges were made.

It remains to consider whether the three-year Statute of Limitations which would bar all counts of plaintiff's petition, or the five-year Statute of Limitations, which would bar 120 counts, should be applied, and that question turns upon whether the plaintiff is suing at common law for excessive charges or for the penalty provided by Section 3248, Revised Statutes 1909.

II. Of the statutes with which we have to deal, Section 3241, Revised Statutes 1909, provides a maximum freight rate and the suit is in form a common law action for the amount charged and collected in excess of that rate. The appellant asserts the petition sufficiently states a cause of action for recovery of the penalty mentioned in Section 3248 in the same article and chapter. That section provides that a corporation making such overcharge shall "forfeit all right to recover or receive any compensation" and may be convicted of a misdemeanor and fined not exceeding $200 for each offense. The party injured may bring action against the railroad company in such case and "be entitled to recover three times the amount taken or received from him in excess of the rate prescribed by this article."

While it is admitted that ordinarily an action at common law could be maintained for charging and collecting for carrying freight, more than the service was reasonably worth, appellant claims the statutes just mentioned afford exclusive remedies and repeal the common law upon the subject. It is necessary to call attention to some of the principles laid down in the books applicable to the matter in hand.

An action will lie at common law to enforce a remedy for neglect of a statutory duty. [McCaskey v. Railroad,174 Mo. App. 724, l.c. 726.] Where the statute creates a new right and provides a remedy for its enforcement the remedy is exclusive. [Chandler v. Railroad, 251 Mo. 592, l.c. 600; City of Clinton ex rel. v. Henry County,115 Mo. 557, l.c. 569.] But where there is already a right of action at common law, and the statute provides an additional remedy the remedy is only cumulative and the remedy at common law still obtains.

"When the statute creates a special duty, for the neglect of which a common-law action would lie, that action is not forbidden by the fact merely that an extraordinary liability in the nature of a penalty is also provided. The latter is only cumulative." [Iba v. Railroad, 45 Mo. 469, l.c. 474; Hill v. Railway,49 Mo. App. 520, l.c. 528; Hill v. Railway, 121 Mo. 477, l.c. 482.]

Where the statute merely enlarges the right which existed at common law it will not be deemed to have repealed the common-law remedy; but if the statute restricts the right and provides a remedy for its enforcement it is exclusive. [Wyckoff v. Hotel Co., 24 Mo. App. 382, l.c. 388-9.] That case is an instructive illustration of the principle. It was an action to enforce an innkeeper's lien. The statute provided a lien for innkeepers and stated the subjects to which the innkeepers' lien would apply, including some articles for which the common law did not allow a lien to innkeepers and excluding some to which the common-law innkeepers' lien would apply. Since it enlarged the right in some respects and restricted it in others, it was held to repeal the common law on the subject of innkeepers' lien.

Section 3241 and Section 3248 appeared in different acts of the Legislature, enacted at different times and later brought together in the revisions. It is argued by the respondent with plausibility, and his position supported by authority, that on account of the difference in origin and purpose of the acts, including them together in the same article and chapter of the Revised Statutes does not necessarily make them applicable to the same subject, and that the penalty provided in Section 3248 cannot be applied to the violation of Section 3241. [Paddock v. Mo. Pac. Ry. Co., 155 Mo. 524, l.c. 535-6; Miller v. Boulware, 267 Mo. 487; Strottman v. Railroad, 211 Mo. 227, l.c. 256-257.]

However, it is not necessary to apply the principle announced in these decisions to the question under consideration. For the purpose of this argument, but without deciding such to be the case, it may be conceded that Section 3248 is applicable to a violation of Section 3241. The appellant argues that the statutes cover the entire subject-matter under consideration and so repeal the common law upon the subject; therefore, the only remedy which the plaintiff had in this case was an action for the penalty provided by Section 3248. In the Iba case, 45 Mo. l.c. 474, the ruling in which has been approved by later decisions (Chandler v. Railroad, 251 Mo. l.c. 600), this court had under consideration the statute requiring railroads to fence their track at certain points. It was held that since an action would lie at common law for the negligent killing of stock which got upon the railroad company's track, the statute, by merely providing an additional remedy, was not exclusive, and the common-law remedy still remained. Appellant asserts that ruling is not in point because the entire subject is not covered in the fencing statute, that there are various circumstances under which the stock might be killed so as to render the railroad company liable where the statute affords no remedy, and the only remedy would be at common law. By the same token we may say the entire subject is not covered in the case of freights by Section 3241 and other sections relating to maximum freight-charges. It is entirely conceivable that a railroad company of the class under consideration might charge the maximum freight rate provided in Section 3241, and the circumstances might be such that the maximum charge would be excessive. Such a situation is both theoretically and practically possible. In that case the only remedy of the shipper would be an action at common law for overcharges. A significant statement in the Iba case, 45 Mo. l.c. 474, is this:

"The statute under consideration imposes the obligation to fence. It dispenses with any other proof of negligence if the fence is not built, and it compensates the sufferer with double the loss. If nothing were said about damages, the defendant would be liable for the actual loss; so, I imagine, he would be liable if nothing more were said about the evidence. The obligation of itself creates the liability."

In this case the statute, Section 3241, provides a maximum freight rate and a charge in excess of that maximum is excessive. The statute dispenses with proof that the charge is excessive, just as the fencing statute dispenses with the proof of negligence. If there were no penalty provided anywhere the shipper could recover for overcharges, just as in the cattle case they could recover for the actual damages inflicted; the case would turn upon a matter of evidence.

Further light is thrown upon the matter by the conclusion announced in the case of White v. Delano, 270 Mo. 16. That was a suit brought to recover the penalty provided by Section 3248, thrice the charges for freight in excess of the rates provided by section 3241. The court held that by the injunction proceeding in the Federal court, to which the defendant railroad company was a party, the same injunction proceeding mentioned in the pleadings in the present case, the penalty section, 3248, was suspended from the time the act was held unconstitutional in the Federal Circuit Court until the decision was reversed by the United States Supreme Court, and the penalty could not afterwards be imposed for any violation of the rate statute during that period.

The court held further that the rate section (3241) was not suspended during the period; so by the reversal by the United States Supreme Court the penalty section was not restored to life so as to take effect during the period the injunction held, but the rate section was revived so as to take effect during that period, and the plaintiff was allowed to recover the actual overcharge. The case separated the rate section from the penalty section, and allowed a recovery for violation of the former when the latter was not enforcible.

We hold the penalty is not an exclusive remedy, plaintiff's action is at common law, and the five-year Statute of Limitations applies.

III. We come now to inquire whether the rate provided for in Section 3241, Revised Statutes 1909, is confiscatory when applied to the shipment of the ties of Hackworth over the defendant's road. Certain principles have been laid down in rate cases before the Supreme Court of the United States to be applied in determining whether a rate is confiscatory and unconstitutional.

The shipments must be considered with all the traffic on the particular road whose rate is attacked. Account must be taken not only of the actual expense in carrying the particular commodity under consideration, but all other expenses, outlays, etc., such as maintenance, replacement, general expense, taxes, etc. All this must be properly apportioned with other intrastate traffic, and in turn the intrastate traffic must be properly apportioned with the interstate traffic. The general expense mentioned must be apportioned, even though it would have been incurred to the same extent if the freight under consideration had not been shipped at all. After these expenses are ascertained and deducted from the receipts at the prescribed rate, there must be sufficient balance to offer a reasonable return upon the value of the plant.

These general principles were applied by the trial court in the determination of this case, as shown by the declarations of law asked by the defendant and given. They covered every contingency in such apportionment which could be thought of, and gave the defendant even more than it was entitled to. There is necessarily a wide discretion in the application of these rules. For instance, it is held not to be necessary that all commodities should be treated as carried at the same rate of expense. [Nor. Pac. Ry. Co. v. No. Dakota, 236 U.S. 597.] The Legislature is not bound to fix uniform rates for all commodities, nor to require that the same percentage be made on all sorts of business. [Id. l.c. 598-9.]

Another principle must be kept in mind. Rate making is purely a legislative function, and may be exercised by the Legislature directly or by some subordinate administrative body, or "administrative arm of the Legislature," such as the Public Service Commission. [Knoxville v. Water Co., 212 U.S. l.c. 8; State v. Mo. Southern Ry. Co., 214 S.W. 381; L. N. Ry. Co. v. Garrett, 231 U.S. l.c. 305.]

In the case last cited it was said, at page 313:

"The rate-making power necessarily implies a range of legislative discretion; and so long as the legislative action is within its proper sphere, the courts are not entitled to interpose and upon their own investigation of traffic conditions and transportation problems to substitute their judgment with respect to the reasonableness of rates for that of the Legislature or of the Railroad Commission exercising its delegated power."

Whether a rate fixed by the Legislature is confiscatory is a question of fact, and the facts which would invalidate the rate-fixing act must be clearly established. [Minn. Rate Cases,230 U.S. 452-453; City of Knoxville v. Knoxville Water Co.,212 U.S. 18.]

The trial court found as a fact that the rates during the years under consideration were not confiscatory as applied to the shipments of the plaintiff's ties; unless the evidence clearly shows to the contrary that finding of the trial court must be sustained.

The most important element to consider in connection with rate fixing is the value of the property on which the carrier must have a reasonable return. The cost of reproduction is mentioned as proper to consider in ascertaining the present value of the plant. [Minn. Rate Cases, 230 U.S. 452.] But this is subject to limitations. Property other than land will depreciate so as to be worth less than if reproduced new and that depreciation must be deducted. [L. c. 457.] In case of real estate, which forms a part of railroad property, increase in value may be considered, provided a speculative increment is not to be taken into consideration. [Minn. Rate Cases, 230 U.S. l.c. 454.] The value must be no greater in the case of real estate than the value of similar lands.

In 1913 the defendant railroad company applied to the Missouri Public Service Commission for the purpose of procuring an order to increase the statutory rates on the ground that such rates were unreasonable and confiscatory. The Public Service Commission, after hearing the case on November 10, 1915, decided the matter and promulgated rates to be applied to all the intrastate shipments of the defendant company. The evidence, comprising several hundred pages, taken before the Commission, was introduced in this case and admitted withont objection. Other evidence was also introduced upon the trial of this case, all of which has been considered by us. It shows such values in theyear 1914, so that the Public Service Commission might fix rates for the future. The appellant asks this court to consider that evidence for the purpose of determining values and the returns on such values for the years 1909, 1910 and 1911. While the report of the Public Service Commission in that case was not introduced in evidence, it is constantly referred to by the appellant (3 P.S.C. Rep., p. 1), as if before the court, and therefore appellant cannot complain if we take in some matters the conclusions reached by the Public Service Commission, instead of examining the details of figures and calculations from which the body drew its conclusions.

There was a conflict in the evidence between the chief engineer of the defendant company, Mr. H.H. Woodman, and that of W.K. Sparrow, representing the Public Service Commission, in the inventory and appraisement of the property. There was also a conflict in the evidence between Mr. McShane, chief accountant of the Public Service Commission, and Mr. Fremon for the defendant company, as to the proper division and apportionment of operating expenses for the year 1914.

In estimating the values the Public Service Commission ascertained the cost of defendant's property as shown by the books of the company, and by the Commission's accountant. The estimates of this book-cost commences with July 1, 1891, and shows the investment in "road equipment and supplies" up to June 30, 1914. It embraces all items of expenditure, including the right of way, station grounds, real estate, grading, bridges, trestles, etc. The Commission, after reviewing and analyzing the evidence, found the original cost of the defendant's plant, "together with additions and betterments, material and stores on hand," did not exceed a total investment of $740,000 at June 30, 1914. In determining the value at that date the Commission apparently took into consideration depreciation and appreciation. It was stated that there appeared no question that parts of the property had appreciated in value, such parts as land and solidification of the roadbed. The cost of grading the roadbed was shown by the evidence to be between $250,000 and $272,000. The land was valued at $38,000, showing the part of the property which had appreciated was very considerable. The Commission then, for the purpose of estimating the present value in 1914, found the property could be reproduced new for $894,500. It then determined the value to be fixed for the purpose of settling the rates June 30, 1914, at $823,000. Since that amount is largely in excess of the original cost, without analyzing the evidence, we conclude it must have been determined by the Commission that the appreciation of the property had been very considerable; more than the depreciation. It is the value thus fixed for 1914 which the appellant desires this court to take into consideration. It suggests the only method of arriving at the value of the property during the years 1909-10-11 is to take account of additions to the plant, and deductions from it between those years and 1914. With additions the plant in 1914 was worth about $17,000 more than in 1909, and about $3,000 more than in 1910. These additions were right of way, station grounds, etc. In 1911 the plant is estimated to be $11,000 greater than in 1914, because a part of the railroad had been abandoned between those dates, so as to reduce the value that much. Thus it appears that the values which the appellant would have this court attach to the property in 1909-1910-1911 is substantially the same as the value which it claims the evidence shows and the Commission found was its value in 1914. The only variations suggested are those slight additions and subtractions to the plant.

The Commission in fixing the value employed as the most important element in its calculations the cost of reproduction new, and from this all calculations were drawn. This was reproduction in 1914, and followed closely estimates made by engineers for the Company and for the Commission. The value fixed was a compromise of those estimates. To arrive at the value of the plant in 1909, 1910 and 1911, there is no estimate as to the costs of reproduction new then. From those years until the estimate in 1914 the solidification of the roadbed and the real estate sensibly appreciated; how much is not shown. The cost of reproduction in 1909 probably would not have been anything like such cost in 1914 — five years later when everything probably was higher. No figures are given as to the value of steel rails in 1909, yet steel rails constituted about one-fourth of the cost of reproduction in 1914. Since the original cost and all betterments was placed at $740,000, it is fair to say there had been great depreciation from 1891 down to that date. And there is no evidence to show whether the cost in 1909 would have been greater or less than the original cost; whether the property was worth more in 1909 than the original cost less actual depreciation. So, in estimating the value for the years under consideration the following elements, taken into consideration in fixing the value in 1914, are entirely lacking: the cost of reproduction new; the depreciation of property other than land; the cost of reproduction in its then condition; the appreciation from 1909-10-11 until 1914 of the land or property which appreciates.

In arriving at the net income for 1914 the Commission summarizes the evidence of McShane and Fremon and finds that the net income for 1914, while the statutory rate was applied, was $55,775 (3 P.S.C. Rep. l.c. 41); that was for the total business interstate and intrastate transacted by defendant company. The net income was much greater for previous years. The evidence of McShane is that the net income for 1909 was $22,516; for 1910, $83,579; for 1911, $72,855, when the charge was in excess of the statutory rate. The Commission notes, as shown by the evidence, that there was a sudden increase of income for 1910, which prevailed during all the subsequent years. The gross income, by the testimony of McShane, for 1910 was $174,648; for 1911, $171,177; for 1914, $174,069. Thus the gross income, grand total revenue, was about the same in the years 1910 and 1911 as it was in 1914, while the total expense in 1914 is shown to be from fifteen to twenty per cent in excess of what it was in either of the three years under consideration. Maintenance for the year 1914 was found by the Commission to be about $55,000, while in the year 1909 it was $34,000; 1910, $22,000; 1911, $20,000.

During the year 1914, it will be noted, the company operated at much greater expense than during the years under consideration. If the company had operated in 1914 at the same expense, for instance, as in 1910, its earnings, instead of being $55,000, would have been about $75,000, a net return of more than ten per cent on what was the probable value in 1914. This, of course, takes the total return and expense for operating the road on all classes of traffic. Mr. Fremon, the general auditor of the defendant company, produced evidence — and this was the only evidence offered upon the point — showing the apportionment of the revenue derived from and the expense assigned to each class of traffic; to the freight and passenger traffic, and to the interstate and the intrastate traffic. He shows the cost of the intrastate service to be more than seventy-six per cent of the total. He estimates the value of the property devoted to each class of service, and about the same per cent of property is assigned to intrastate use. The revenue from the interstate traffic appears by Fremon's calculation to have been, for the year 1914, almost forty per cent of the total. Taking these figures with the entire net return for 1914, making proper adjustment between the interstate and intrastate traffic, considering the elements lacking in a proper estimate of the values of property for the years under consideration, and the lessened expense of operation during those years, we cannot say that the trial court was in error when it found that the defendant company had failed to prove that the charges during those years were excessive and confiscatory.

If one apportions the expense of operation so as to make it in the same proportion as the income between interstate and intrastate traffic, and then makes allowance for the smaller expense for the years 1909, 1910 and 1911, as compared with 1914, it is easy to figure a fair rate of interest on the investment for those years, especially if the value for those years was appreciably less than in 1914.

From the record there are 127 counts of the petition barred by the five-year Statute of Limitations, but seven of these were dismissed, and respondent does not dispute the statement that the overcharges alleged in these counts occurred more than five years before the suit was filed.

The judgment is therefore reversed as to the 120 counts mentioned by number in the answer after the dismissal of the seven mentioned, and the judgment of the trial court is affirmed as to the other counts. Mozley, C., concurs; Railey, C., not sitting.