State Ex Rel. Joplin & Pittsburg Railway Co. v. Public Service Commission

WOODSON, J. This is a proceeding by mandamus instituted in this court by the relator against the respondent to compel them to authorize the former to issue its bonds in the sum of $278,000 as authorized by its first mortgage, dated March 1, 1910, to be more fully mentioned later. The facts of the case are undisputed, and appear from the petition for the writ, and the return thereto, which is a demurrer, to be substantially as follows: The company has the contract right, by the terms 'of the mortgage mentioned, to issue these bonds on ac *457 count of additions and extensions to and of its property-made since the date of the mortgage and to sell the same and receive the proceeds thereof. That mortgage was upon all of the property of the company then existing or thereafter acquired. By its terms, the company could not create another first lien upon property thereafter acquired and borrow money by reason thereof, having disabled itself from so doing by reason of the after-acquired property clause, by the terms of which the mortgage covered not only all property in existence at its date but also all thereafter acquired. Hence, it was provided that the company should have the right to borrow money by way of additional first mortgage bonds on a parity with those already issued to the extent of eighty per cent of the value of the property acquired by the company subsequent to the- date of the mortgage. It was further provided in this mortgage that after the expenditures were made the company should not issue bonds on account thereof unless and until the company could show that its net earnings, for twelve months preceding the issuance, were equal to twice its interest charges. The company was unable to make such showing as to’ interest, and hence unable to exercise the right to issue these bonds, until shortly before the date of its application to the Commission. In other words, the company made its application as soon as it was entitled under the terms of its mortgage to issue the bonds. The provisions of the company’s first mortgage enabling it to issue these additional bonds constituted a property right springing from the contract. Application was duly made to the Commission for the requisite authority to issue these bonds. A hearing was regularly held and the authority denied. The Commission found and declared that: (a) the company was given the right by the mortgage to issue the bonds; (b) it had actually made the additions to property claimed; (c) had complied in all respects with the terms of the mortgage contract to be performed by it as a condition *458 to such issuance; (d) was entitled under the law and facts to be authorized by the Commission to make such issue, and the Commission should and would authorize the-same, "save and except only for the fact that a part of the expenditures occurred more than five years prior to the application to the Commission for such authority, and that the Commission was prohibited by the provisions of Section 57 of the Act from authorizing the issuance of bonds for additions made more than five years previous to the application. The company was not remiss in failing to apply for authority to issue these bonds within five years after the, expenditures. As stated, it could, under the mortgage, issue .additional bonds only when it could show net earnings double the interest charges. This showing it could not make previous to the date of the application. This fact is pleaded and is, of course, admitted by the demurrer. The Commission held that it was prohibited by a provision of Section 57 of the Public Service Commission Act from granting such authority where such expenditures have occurred more than “five years next prior to the filing of an application with the Commission for the required authorization.” Under these circumstances it is contended that in the event that such quoted provision is not applicable or for any reason is void, then the Commission, having'found that but therefor it should and would grant the authorization, the company is entitled to have th.e Commission compelled to grant the authority as a mere ministerial act. The first contention of counsel for relator is stated in the following language: “The five-year limitation provision, if applied to the mortgage contract in question, is unconstitutional, null and void and constitutes no defense for the failure of the Commission to grant the authority in reliance thereon because (a) such provision so' applied impairs the obligations of the mortgage contract, and (b) de *459 prives the company of its property, i. e., its vested right to issue these bonds and receive the proceeds thereof, without due process of law. ‘ ¡ There can be no question but what the mutual rights of the parties as stated in the mortgage are protected by Section 10 of Article I of the Constitution of the United States, which provides, among other things, that ‘no State shall . . . pass any law . . . impairing the obligations of a contract. ’ The rulings of the Supreme Court of the United States are all one way upon that subject. [6 Ency. U. S. Sup. Ct. Reports, 765, 782, 874; Fletcher v. Peck, 6 Cranch. 87, 137, 3 L. Ed. 162, 178; Green v. Biddle, 8 Wheat. 1, 5 L. Ed. 547, 570; Dartmouth College v. Woodward, 4 Wheat. 518, 4 L. Ed. 629, 657, 663; Ogden v. Saunders, 12 Wheat. 213, 316, 6 L. Ed. 606.]” There cannot be any doubt but what the five-year limitation of the Public Service Commission’s right to authorize the issue of the bonds in question is an impairment of the company’s contract right to issue the bonds in question, and for that reason is unconstitutional and void, without such limitation can be sustained upon the ground that it is a reasonable police regulation. That the State under its police power, within reasonable limitation, has the authority to regulate or prohibit the issuance of bonds secured by mortgage upon the properties of public service corporations goes without 'saying, biit that does not mean that the State has the absolute arbitrary right or power to so do, for five years or for any other period of time, unless it appears that the exercise of such authority is in the interest, protection or promotion of the public good, defined by the State and Federal courts, but not otherwise. [State v. Smith, 233 Mo. 242, l. c. 265; State v. Fisher, 52 Mo. 174, l. c. 177; United States v. D. & H. Co., 213 U. S. 366; Harriman v. Interstate Comm., 211 U. S. 411.] From the facts in this case it does not appear that the public good will in any way be served by withholding *460 from the company the authority to issue the bonds mentioned, but it is inferable, at least, that the public good will be promoted and served by their issuance, because it is always beneficial to the public interest that the railroads of the country should be maintained and improvements made in' the way of betterments, which the facts in this- case show was the design, to pay for improvements made by the company. For the reasons stated we are of the opinion that the alternative writ heretofore issued should be made permanent. It is so ordered. All concur, David E. Blair, J., in separate opinion; James T. Blair, G. J., not sitting.