face Ret set by statut D. Co., refurres to hovor ) as set by law and I brings suit. Expenses of co. are matured, and must not be invariable. 1. Expenses ledrected brome Carming lest theyy must be reasonable. 302 RATES. [CHAP. IV. ticket is made, a suit commenced, and within two months a judg ment obtained in the trial court; a judgment rendered, not upon the presentation of all the facts from the lips of witnesses, and a full inquiry into them, but upon an agreed statement which precludes inquiry into many things which necessarily largely enter into the determination of the matter in controversy. A single suggestion in this direction: It is agreed that the defendant's operating expenses for 1888 were $2,404,516.54. Of what do these operating expenses consist? Are they made up partially of extravagant salaries,- fifty to one hundred thousand dollars to the president, and in like proportions to subordinate officers? Surely, before the courts are called upon to adjudge an act of the legislature fixing the maximum passenger rates for railroad companies to be unconstitutional, on the ground that its enforcement would prevent the stockholders from receiving any dividends on their investments, or the bondholders any interest on their loans, they should be fully advised as to what is done with the receipts and earnings of the company; for, if so advised, it might clearly appear that a prudent and honest management would, within the rates prescribed, secure to the bondholders their interest, and to the stockholders reasonable dividends. While the protection of vested rights of property is a supreme duty of the courts, it has not come to this, that the legislative power rests subservient to the discretion of any railroad corporation which may, by exorbitant and unreasonable salaries, or in some other improper way, transfer its earnings into what it is pleased to call "operating expenses." We do not mean to insinuate aught against the actual management of the affairs of this company. The silence of the record gives us no information, and we have no knowledge outside thereof, and no suspicion of wrong. Our suggestion is only to indicate how easily courts may be misled into doing grievous wrong to the public, and how careful they should be to not declare legislative acts unconstitutional upon agreed and general statements, and without the fullest disclosure of all material facts. Judgment affirmed. TRIEBER, District Judge, in re ARKANSAS RATE CASES. 187 Fed. 290. 1911.1 Personal Injuries. It is also claimed that complainants are not entitled to "charge in the expense of operation the sums they paid for injuries to persons." This claim cannot be treated 1 Only an extract from the voluminous opinion is here reprinted.- ED. Le Held :- Suspirees to passengers case be operating expenses SEC. IV.] concited as not iretful. OPERATING EXPENSES AND MAINTENANCE. 303 Held! seriously. It is true, as claimed by counsel, "that the people of Arkansas are not insurers of the risks of the railroad business;" but, on the other hand, such accidents cannot be wholly avoided, and, as there is no pretense that they were willful or intentional on the part of the officials of the company, they must be considered as unavoidable risks of operation of the business. Many persons and corporations engaged in industrial pursuits of a character dangerous to employés or others insure themselves against act that such loss, and the premiums paid therefor are charged to expense of operation. Railroads, or rather these roads, for reasons which R. Rames are not explained by the evidence in these cases, but probably economic, carry their own insurance against such losses, and charge them as expense of operation, as they would otherwise charge the premiums paid for the insurance, if they obtained it from insurance companies. As these indemnity insurance companies make the charge high enough to cover the expense of the management of their business and a profit on their investment, the policy of the railroad companies is probably most economical. lf. is immaterial. PANNELL v. LOUISVILLE TOBACCO WAREHOUSE CO. 113 Ky. 630. 1902.1 HOBSON, J. In the year 1900 the appellants instituted a number of suits at law to recover penalties for the violation of sections 4799, 4801, 4803, Ky. St. Section 4799 provides that a warehouseman, in settling with a shipper, shall account to him for the net weight of the tobacco sold, including the sample; section 4801, that the warehouseman, in selling leaf tobacco at public auction, shall receive as compensation therefor $2 a hogshead from the owner or his agent; section 4803, that it shall be unlawful for the warehouseman directly or indirectly to charge the seller or owner anything by way of commission or otherwise for paying to him the money for which his tobacco is sold. Section 4807 makes the warehouseman liable to the party aggrieved in the sum of not less than $25 nor more than $100 for a violation of these provisions. Appellees are warehousemen in Louisville, Ky., and appellants are sellers of tobacco. The actions instituted by appellants sought to recover penalties for violation of the foregoing sections by the warehousemen in not accounting to the shipper for the full weight of his tobacco, and in charging him commission on the price in addition to the $2 a hogshead for selling it 1 Part only of the opinion is reprinted.-Ed. Statut rates are less ition and rate but [After disposing of other matters the court continues:] As shown by the proof, the only reduction in charges under the statute from those made by the warehousemen under their rules is that the statute cuts off a charge of 1 per cent. commission on the amount of the sale which the warehouseman collected from the seller, and reduced the charge for reselling a hogshead of tobacco from $2 to $1.50. As a hogshead of tobacco ordinarily sells for from $50 to $100 on an average, the 1 per cent. commission would amount to from 50 cents to $1 on a hogshead. Something like one-fourth of the sales are rejected, and on these resales of onefourth of the tobacco under the statute the charge would be for selling these hogsheads $3.50, instead of $4, as under the rule. The statute would, therefore, make a net reduction of the fees charged by the warehouse of something like $1 on the hogshead, and the question presented is, would such a reduction of their fees amount to a taking of their property for public use without just compensation, or deprive them of their property without due process of law? .. About 175,000 hogsheads are sold annually by appellees. But a short time is taken to sell a hogshead, and it is hard to escape the conviction, from the proof, that there is a very bitter rivalry between them to secure trade, and that this rivalry is somewhat promoted by the scale of fees that are charged under the rules. In other words, the rules allow a liberal compensation, and it is a matter of importance to the warehouse to secure the trade of a customer, and in order to secure trade the houses expend large amounts in the country. If the business was not so remunerative, Reduction they could not afford to expend as much as is shown by the proof of fees. in securing it, and we do not think it can be maintained that a scale of fees which is so large as to justify the warehouseman in expending large amounts to secure trade might not be properly reduced. For we know that the larger the fee, the more the warehousemen can afford to pay out to get the trade; and it is not the policy of the law that the warehouseman should be allowed to charge a large fee against the shipper, in order that he may be able to spend a portion of it in securing the trade. To illustrate: If the fees were so large that the warehousemen could give half of them to get the business, it is manifest that this would lead to practices that ought not to be encouraged, and would be a hardship on the tobacco raiser, which the statute was designed to prevent. Of course, the proof before us does not show such an extreme case as this. But the facts shown by the evidence do not present a case showing clearly and beyond all doubt such a flagrant attack upon the rights of property as to compel the court to say that the Heed: Rate O.K. rate prescribed will necessarily have the effect to deny just com pensation for private property taken for public use.2 WILLIAMS, J., IN BRYMER v. BUTLER WATER CO. 179 Pa. St. 231. 1897.1 1. Reasonable This leads us to the second question raised, viz: By what rule is the court to determine what is reasonable, and what is oppressive? Ordinarily, that is a reasonable charge or system of charges which yields a fair return upon the investment. Fixed charges and the costs of maintenance and operation must first be provided for. Then the interests of the owners of the property are to be considered. They are entitled to a rate of return, if their property will earn it, not less than the legal rate of interest; and a system of charges that yields no more income than is fairly required to maintain the plant, pay fixed charges and operating expenses, provide a suitable sinking fund for the payment of debts, and pay a fair profit to the owners of the property, cannot be said to be unreasonable. This whole subject was brought to the attention of the learned judge by a request that he should find, as matter of law, that the reasonableness of the charges must be determined with reference to the expenditure in obtaining the supply, and previding for a fund to maintain the plant in good order, and pay a fair profit upon the money invested by the owners, and that a rate which did no more than this was neither excessive nor unjust. This the learned judge refused to find, saying, in reply to the re- publis quest: "We have no authority for such a ruling, and it would be not considered. unjust to the consumer, who would have to pay full cost of the water, provide a sinking fund, secure a reasonable profit upon the investment, and have no voice in the management of the business of the company. The act of assembly in this regard can bear no such construction." This ruling cannot be sustained. The cost of the water to the company includes a fair return to the persons who furnished the capital for the construction of the plant, in addition to an allow 2 Compare on this point In re Arkansas Rate Cases (1911), 187 Fed. 290, at p. 316. 1 Only an extract from the opinion is here reprinted.- ED. Held; theed: treasonable rate ance annually of a sum sufficient to keep the plant in good repair, and to pay any fixed charges and operating expenses. A rate of water rents that enables the company to realize no more than this is reasonable and just.2 y to pay Livethy Chyes. & operating efferals. Included cost are the fixed charges. BREWER, J., IN CHICAGO AND NORTHWESTERN 35 Fed. 866. 1888.1 Compensation implies three things: Payment of cost of service, interest on bonds, and then some dividend. Cost of service implies skilled labor, the best appliances, keeping of the roadbed and the cars and machinery and other appliances in perfect order and repair. The obligation of the carrier to the passenger and the shipper requires all these. They are not matters which the carrier can dispense with, or matters whose cost can by them be fixed. They may not employ poor engineers, whose wages would be low, but must employ competent engineers, and pay the price needed to obtain them. The same rule obtains as to engines, machinery, roadbed, etc., and it may be doubted whether even the legislature, with all its power, is competent to relieve railroad companies, whose means of transportation are attended with so much danger, from the full performance of this obligation to the public. The fixed charges are the interest on the bonds. This must be paid, for otherwise foreclosure would follow, and the interest of the mortgagor swept out of existence. The property of the stockholders cannot be destroyed any more than the property of the bondholders. Each has a fixed and vested interest, which cannot be taken away. I know that often the stockholder and the bondholder are regarded and spoken of as having but a single interest; but the law recognizes a clear distinction. A mortgage on a railroad creates the same rights in mortgagor and mortgagee as a mortgage on my homestead. The legislature cannot destroy my property in my homestead simply because it is mortgaged, neither can it destroy the stockholders' property because the railroad is mortgaged. It cannot interfere with a contract between the company mortgagor and the mortgagee, or reduce the stipulated rate of interest; and so, unless that stipulated interest is paid, foreclosure of course follows, and the mortgagors' rights, the property of the stockholders, 2 Compare Houston & Tex. Cent. Ry. Co. v. Storey, (1906). 149 Fed. 499, 503. 1 Only an extract from the opinion is here reprinted.- ED. |