Coffee v. Gray

Hines, J. (After stating the foregoing facts.) 1. "We think the employees had such an interest in this proceeding as entitled them to be made formal parties. The application of the receiver was to cut their wages. He was proceeding in equity. In this matter the employees had a vital interest. All persons interested in litigation should be parties to proceedings for equitable relief. Civil Code (1910), § 5417; Houston v. Redwine, 85 Ga. 131 (11 S. E. 662). Besides, the chancellor had invited the employees to show cause why the relief sought by the receiver should not be granted. The response to this invitation should have been by proper pleadings by the employees, rather than in mass-meeting or mob form. But as the chancellor permitted them, although not made formal parties, to be heard upon their written demurrer, which raised the question that the court was without jurisdiction to authorize its receiver to reduce the wages of employees, and that exclusive authority was vested in the Hnited States Labor Board to reduce the wages of employees of an interstate carrier, and inasmuch as this was the only response which the employees wished to make to the receiver’s application for reduction of their wages, and as the chancellor considered and decided this question, we do not think’his failure to make them formal parties to the proceeding requires a reversal of the judgment in this case. 2. Did the chancellor have authority to reduce the wages of the employees of this carrier, independently of any action of the Hnited States Labor Board, under the facts of this case? One who devotes his property to public use subjects it to public regulation. Munn v. Illinois, 94 U. S. 113 (24 L. ed. 77). But such regulation must be reasonable, and not arbitrary. To require a railroad company to continue in business at a- loss is beyond the powers of Congress or a State. “Apart from statute or express contract, people who have put their money into a railroad are not bound to go on with it at a loss, if there is no reasonable prospect of profitable operation in the future.” Bullock v. Florida, 254 U. S. 513 (41 Sup. Ct. 193, 65 L. ed. 380); Brooks-Scanlon Co. v. Railroad Commission, 251 U. S. 396 (40 Sup. Ct. 183, 64 L. ed. 323). Nor can a railroad company or a receiver of such company be required to operate a railway on a scale of wages which produce [226] continual loss, and which will finally eat up the corpus of the property. Under our constitutional system of government, there is no power in or out of Congress, in a State, or in the judiciary to compel those who devote their property to the use of the public to operate the same at rates or wages which occasion loss. In good morals neither the public nor the employees should demand such sacrifice. So, while the Adamson law was held constitutional (Wilson v. New, 243 U. S. 332, 37 Sup. Ct. 298, 61 L. ed. 755, L. R. A. 1917E, 938, Ann. Cas. 1918A, 1024), the Supreme Court of the United States held that this law, “although by its general terms purporting to apply to all railroads and railroad employees subject to the act to regulate commerce, was not intended to govern the exceptional case of an insolvent railroad operating at a loss under an agreement with its men, which they desired to keep, allowing them less wages than the act prescribed.” Ft. Smith &c. R. Co. v. Mills, 253 U. S. 206 (40 Sup. Ct. 526, 64 L. ed. 862). It is true in that case the employees agreed to accept wages lower than those prescribed by the Adamson law; but that fact was not the determining factor in the decision in that case. The determining factor was, that the Adamson act “was not intended to govern the exceptional case of an insolvent railroad,” and was never intended to apply when its application would violate the constitution of the United States. In that case the court, referring to Wilson v. New, supra, said: “It was not decided that there might not be circumstances to which the act could not be applied consistently with the fifth amendment, or that the act in spite of its universal language must be construed to reach literally every carrier by railroad subject to the act to regulate commerce.” Under the circumstances of this ease, the transportation act cannot be applied consistently with the fifth amendment to the constitution of the United States. We should give that act a construction which will not infringe that amendment. Under that amendment, Congress cannot require a railroad company to pay wages which the company does not earn, and payment of which will consume its property. So in St. Louis Union Trust Co. v. M. & N. A. R. Co., 270. Fed. 796, it was said: “In view of the provisions of Const. U. S. Amend. 5, the receiver for railroad property which has been operated at a continuous loss, both before and since the receivership, and where the gross earnings are insufficient to pay operating [227] expenses, and money can no longer be borrowed on receiver’s certificates, may be authorized to reduce wages of employees below the scale fixed by the United States Eailroad Labor Board by decision No. 2, in effect May 1, 1920, without being subject to the penalty provided by transportation act, § 312.” If this can be done after the labor board has made an investigation and fixed reasonable wages, it certainly can be done when no such investigation has been made and no decision rendered by that board fixing wages. In this case the railroad company has never met the interest on its bonded indebtedness, and has now past-due interest on its bonds of $1,016,930. It has never declared a dividend on its stock, and has never been able to earn its operating expenses. While under government control during 1918, 1919, and 1920, it did not earn operating expenses, and there were large annual deficits, aggregating $115,288.26. After it was turned back, to its owner the same thing occurred. Since March 1, 1920, these deficits have aggregated $207,206.13. The defendant is hopelessly insolvent, and will be forced to suspend unless drastic measures are taken by the court to avert such suspension. The company was in default in the payment of taxes assessed against it before it was put in the hands of a receiver. This railway is in need of repairs and betterments, and is without funds to pay therefor. Money can no longer be borrowed to pay the operating deficits. Under these circumstances, the receiver is not earning the money with which to pay the wages which the employees were getting at the time he made this application to the court for authority to reduce. Not earning the money with which to pay these wages, the’only recourse left would be to borrow upon receiver’s certificates, if that could be done, and thus burden the property with the payment of the money borrowed to meet wages which the railroad was not earning. This would amount to the taking of the property of the railroad company in violation of this amendment to the Federal constitution. Such a construction should not be put upon the transportation act as would lead to this dire result. So we are of the opinion that the transportation act was not intended to apply to a receiver engaged in the operation of an insolvent and crippled railroad, when the latter is not earning money enough to pay operating expenses, including the scale of wages which was of force at the time of his appointment, and [228] where by a reduction of wages an entire suspension of operation and the destruction of the property may be prevented. The employees will not and cannot be compelled to accept the reduced wages, while the property will have to be operated or the owners will lose it. 3. Applying the rulings enunciated in the foregoing division of this opinion, they dispose of the merits of this controversy; and it is unnecessary to discuss any of the other-points raised and discussed in the briefs of counsel. Judgment affirmed. All the Justices concur.