Eichholz v. Hargus

REEVES, District Judge. This is a suit to enjoin the cancellation or revocation of a permit granted to plaintiff as an interstate motor carrier, and bearing date November 23, 1934. The order of revocation was made effective December 30, 1936. A temporary injunction was granted January 23, 1937, and the case was tried and submitted on final hearing February 2, 1938. An order of a state administrative board being challenged, a three-judge court was constituted in conformity with Section 380, Title 28 U.S.C.A. Section 5268(b), Laws Missouri 1931, Mo.St.Ann. § 5268(b), p. 6685, relating to Motor Vehicles, provides for the granting of permits by the Public Service Commission of the State of Missouri to motor carriers desiring “to use any of the public highways of this state for the .transportation of persons or property, or both, in interstate commerce * * * In accepting such permits the carriers become obligated to pay certain license fees at times and in accordance with schedules prescribed by law. By section 5269, Laws Missouri, 1931, supra, Mo.St.Ann. § 5269, p. 6686, “The commission may at any time, for good cause, suspend, and upon at least ten days notice to the grantee of any certificate, and an opportunity to be heard, revoke, alter or amend any certificate issued under the provisions of the act.” The permit granted to the plaintiff by the Public Service Commission of Missouri authorized him to “operate interstate as a freight carrying motor carrier over an irregular route as follows: From all points in Missouri to points beyond the state and from points beyond Missouri to all points within the state, exclusively in interstate commerce.” At the time this permit was granted there was in effect a rule (having, the force of law) promulgated by the Public Service Commission of Missouri as authorized by Statute, and known as Rule No. 44. By this rule the holders of interstate permits were forbidden to transport within the state property accepted in the state and “known to be destined to a point within the state of Missouri.” It was further provided that “if such interstate carrier accepts within Missouri property destined to a point beyond the limits of the state of Missouri such property shall not be terminated within the state of Missouri.” The reason for the attempted cancellation of plaintiff’s interstate permit was, as it was charged, that he was operating in violation of said permit. Such violation consisted in carrying property from one point in Missouri to another point in — 589 — Missouri as an intrastate carrier whereas he did not have a license as such. Although the plaintiff made no complaint of the license fees exacted under the laws of Missouri, nevertheless, he has not paid the usual fees since the granting of the temporary restraining order on December 31, 1936. He has been carrying on his regular business as a carrier under the protection of this court’s restraining order. As a result, a supplemental answer has been filed asking this court to grant a hearing in the nature of an accounting of fees to the State of Missouri from the plaintiff on account of his operations since the protective restraining order was granted. The temporary injunction heretofore granted by this court was predicated upon the record of evidence before the Public Service Commission, ex parte affidavits, and some additional oral testimony. At that time it was made to appear that a small percentage of the property carried by plaintiff was between points in Missouri, and that such transportation was effected by carriage from St. Louis, Missouri, to a terminal station in Kansas City, Kansas, and, that, because of a zone within which a pickup service was authorized, a small amount of property was picked up in Kansas City, Missouri, assembled at the terminal in Kansas City, Kansas, and then transported to St. Louis, Missouri, for delivery. The facts as then presented warranted the court in issuing a temporary injunction, as a matter of judicial “convenience” until final hearing on the merits. Plaintiff has regular line hauls and fixed terminal depots. Its chief line hauls are between its terminals or depots at St. Louis, Missouri, Kansas City, Kansas, Wichita, Kansas, Des Moines, Iowa, and Burlington, Iowa. Between these points admittedly it hauls a large volume of freight. From its depot or terminal point at Kansas City, Kansas, it has a pickup zone with a radius of twenty-five miles. Its terminal in Kansas City, Kansas, is within one-half mile of the Missouri State Line and a very few blocks from the trafficway connecting Kansas City, Kansas, with Kansas City, Missouri. At that point, according to the testimony, it is in very close proximity to several heavy shippers, including meat packers. There is an inference from the testimony that it hauls considerable property for these shippers. During its operations it has carried a great deal of merchandise from shippers or consignors at St. Louis, Missouri, to consignees in Kansas City, Missouri. In many instances such shipments were made in truckload lots so that the plaintiff continued the line haul from his terminal in St. Louis to the depot or terminal in Kansas City, Kansas, and a new driver, and probably a new tractor, made the delivery by transporting the same merchandise or property back into Missouri over the identical traffieways used in going to the terminal in Kansas City, Kansas. Plaintiff testified that its transportation of property or merchandise between points in Missouri aggregated 10 per cent, of his traffic. One witness for the defendant testified that the percentage aggregated 40 per cent, of the entire business across the state. Another witness testified that the intrastate traffic would aggregate 25 per cent, of the total volume. In many instances it was the habit of shippers in Missouri to consign their merchandise to themselves or some person at the terminals in Kansas City, Kansas, and then reconsign the same merchandise to a Missouri point. Other facts will be stated as they become pertinent in the course of this memorandum opinion. ' 1. At the outset, it is contended by the plaintiff that, having engaged in interstate commerce, the acts of Congress would be supreme and exclusive, and that he is not subject to supervision by state authorities. Such was the holding in Missouri Pacific Railroad Co. v. Stroud, 267 U.S. 404, loc. cit. 408, 45 S.Ct. 243, 69 L.Ed. 683. The court said (page 245): “It is elementary and well settled that there can be no divided authority over interstate commerce, and that the acts of Congress on that subject are supreme and exclusive.” An examination of the national Motor Carrier Act, 49 U.S.C.A. § 301 et seq., however, does not reveal an intention of the Congress to occupy the entire field and to exclude the authority of the states. Section 302, Title 49 U.S.C.A., contains a “Declaration of policy and delegation of jurisdiction to Interstate Commerce Commission.” By subdivision (a) of said Section it is the expressed purpose of the — 590 — Congress to “cooperate with the several States and the duly authorized officials thereof * * * in the administration and enforcement of this chapter.” And then, by subdivision (c): “Nothing in this chapter shall be construed to affect the powers of taxation of the several States or to authorize a motor carrier to do an intrastate business on the highways of any state, or to interfere with the exclusive exercise by each State of the power of regulation of intrastate commerce by motor carriers on the highways thereof.” It will be seen from the foregoing that it was the intention of the Congress to leave with each state the exclusive right to regulate and control intrastate commerce by motor carriers on the highways of such states. This exclusive right could not be exercised properly if the state were compelled to await a determination and a conclusion of the interstate commerce commission in every case as to whether traffic belonged to interstate commerce or to intrastate commerce. It must be obvious that in case the Interstate Commerce Commission should determine that a particular haul or carriage was interstate commerce, a ruling to the contrary by the state authorities would be unavailing, but in the absence of conflict, the decision of the State authorities would prevail. Again, it appears from the evidence that the Interstate Commerce Commission, because of a congestion 'of applications from motor carriers, has been unable to exercise prompt supervision over interstate motor carriers. In the case of Sproles v. Binford, 286 U.S. 374, loc. cit. 390, 52 S.Ct. 581, loc. cit. 585, 76 L.Ed. 1167, the court said: “ ‘In the absence of national legislation especially covering the subject of interstate commerce, the state- may rightly prescribe uniform regulations adapted to promote safety upon its highways and the conservation of their use, applicable alike to vehicles moving in interstate commerce and those of its own citizens.’ ” This principle was taken and approved from the case of Morris v. Duby, 274 U.S. 135, 47 S.Ct. 548, 71 L.Ed. 966. The rule announced in the Minnesota Rate Cases, Simpson v. Shepard, 230 U.S. 352, 33 S.Ct. 729, 57 L.Ed. 1511, 48 L.R.A., N.S., 1151, Ann.Cas.1916A, 18, was to the effect that the states may act within their respective jurisdictions until Congress sees fit to act. In this case, while the Congress has acted, it has not only left with' the states a large measure of authority in determining what is and what is not intrastate commerce, but it has not as yet been able to make its legislation effective. Until that has been done, the federal courts must, in a large measure, recognize state regulations and follow the decisions upon such regulations by the duly constituted state authorities. In this case, the Public Service Commission of the State, after due process, has determined that the plaintiff was engaging in intrastate commerce, and that because of such violation of its interstate permit the commission exercised its right under the statute to cancel such permit. 2. However, assuming that the ruling of the Public Service Commission of Missouri is not binding upon us, in the absence of a definite contrary ruling by the Interstate Commerce Commission, the question for us to determine is whether the operations of the plaintiff as gleaned from the above facts were, in part at least, intrastate. This is purely a factual question. Ohio Railroad Commission v. Worthington, 225 U.S. 101, 102, loc. cit. 108, 32 S.Ct. 653, 56 L.Ed. 1004. As said in the last case, loc. cit. 110, 32 S.Ct. loc. cit. 656, “The test of through billing is not necessarily determinative” of the question as to whether it is intrastate or interstate commerce. The subject was discussed in Southern Pacific Terminal Co. v. Interstate Commerce Commission and Young, 219 U.S. 498, 31 S.Ct. 279, 55 L.Ed. 310, where a shipment was made from sundry points in Texas to a shipper as consignee at Galveston. At that point the property shipped was prepared for export. The court properly held that such transportation was within the jurisdiction of the Interstate Commerce Commission. The shipper was denied the advantage of a lower tariff, because the court said that it constituted an undue preference in his favor. In the case of Baltimore & Ohio S. W. R. R. Co. v. Settle, 260 U.S. 166, loc. cit. 170, 43 S.Ct. 28, loc. cit. 30, 67 L.Ed. 189, the court said: “And whether the interstate or the intrastate tariff is applicable depends upon the essential character of the movement. That the contract between shipper and carrier does not necessarily determine the — 591 — character was settled by a series of cases in which the subject received much consideration.” The court then cited some of the cases hereinbefore discussed, as well as Texas & New Orleans R. R. Co. v. Sabine Tram Co., 227 U.S. 111, 33 S.Ct. 229, 57 L.Ed. 442; Railroad Commission of Louisiana v. Texas & Pac. Ry. Co., 229 U.S. 336, 33 S.Ct. 837, 57 L.Ed. 1215. Conversely to the contentions here made, the Supreme Court held in Baltimore & Ohio Co. v. Settle, supra, adopting the same principle announced in Baer Bros. Mercantile Co. v. Denver & R. G. R. R. Co., 233 U.S. 479, 34 S.Ct. 641, 58 L.Ed. 1055: “That a carrier cannot, by separating the rate into its component parts, charging local rates, and issuing local waybills, convert an interstate shipment into intrastate transportation, and thereby deprive a shipper of the benefit of an appropriate rate for a through interstate movement.” In this case, the plaintiff hauled truckloads of merchandise from shippers or consignors in St. Louis, Missouri, to consignees in Kansas City, Missouri. It was neither a normal nor a natural route, to extend the carriage to the terminal depot in Kansas City, Kansas. There was no reason for it. It was not a matter of convenience to the shipper, nor was it a matter of convenience to the carrier. Immediately that the haul terminated at the depot or terminal in Kansas City, Kansas, a new driver and in some instances with the same tractor took the merchandise or property back over the same traliieway and effected immediate delivery in Kansas City, Missouri. It was patent that the object of the shipper was to secure the benefit of a lower tariff by converting the shipment into an interstate haul. The shipping charges were approximately one-third less if in interstate commerce than if in intrastate commerce. The plaintiff has cited in support of his contention the very recent case of Roundtree v. Terrell et al., D.C., 22 F.Supp. 297 decided February 17, 1938, in the Northern District of Texas. That case, as this case, pended before a three-judge court. The motor carrier hauled merchandise from points in Texas, through Texarkana to Little Rock, Arkansas. Some of the shipments or consignments were unloaded at a terminal or depot in Texarkana, Arkansas, and then carried back and delivered to consignees at Texarkana, Texas. The Texas court upheld the operation as interstate commerce. In doing so, it said that the pickup or delivery truck at Texarkana was not a line haul truck, but it was a local truck bearing an Arkansas license. It said, furthermore, that the merchandise from the line haul came to rest and was unloaded at the carrier’s depot in Texarkana, Arkansas. The court further found concerning the shipment (page 299) : “It is unloaded there in the nighttime, and the next morning the local delivery truck makes delivery of it within the municipal limits to whichever side of the city it may be consigned. * * * The line trucks reach Texarkana about 4 or 5 o’clock in the morning, all places of business are closed, such freight as is consigned to that point is unloaded and locked in the warehouse, the line truck then proceeds on to Little Rock. * * * The freight which originates in Texas and is subsequently delivered to Texarkana, Tex., must be and is transported over the line into Arkansas, and comes to rest in the warehouse in that state.” The court then said concerning this method of operation : “It would not seem appropriate to compel the complainant to deliver freight in Texarkana, Tex., as he passes through in the nighttime, rather than following his legally chosen method of unloading it at his warehouse and then delivering it to the consignee, by another carrier, during business hours.” The situation here is vastly different. In a few instances no doubt the merchandise picked up at St. Louis is unloaded at the terminal or depot in Kansas City, Kansas, and, in that event, as we held on our first hearing, such operation would not be a violation of the interstate permit. On this point, it appears that the Congress intended to leave to the states the exclusive right to control and supervise shipments between points in the same state, even though, by reason of an interstate routing, the property was given an interstate character. The last proviso of Subdivision (a) of Section 306, Title 49 U.S.C.A., is as follows: “And provided further, That this paragraph shall not be so construed as to require any such carrier lawfully engaged in operation solely within any State to obtain from the Commission a certificate — 592 — authorizing the transportation by such carrier of passengers or property in interstate or foreign commerce between places within such State if there be a board in such State having authority to grant or approve such certificates and if such carrier has obtained such certificate from such board. Such transportation shall, however, be otherwise subject to the jurisdiction of the Commission under this chapter.” Quite obviously the Congress undertook to avoid controversies and disputes such as the one involved in this case. The Interstate Commerce Commission would exercise jurisdiction over such commerce only in those cases where the state authorities had failed to do so. The facts in this case are similar to Sprout v. South Bend, 277 U.S. 163, loc. cit. 168, 48 S.Ct. 502, loc. cit. 503, 72 L.Ed. 833, 62 A.L.R. 45, where the court said: “The legal character of this suburban bus traffic was not affected by the device of. requiring the payment of a fare fixed for some Michigan point or by Sprout’s professing that he sought only passengers destined to that state. The actual facts govern. For this purpose, the destination intended by the passenger when he begins his journey and known to the carrier, determines the character of the commerce.” The testimony in support of the plaintiff tended to show that his depot or terminal in Kansas City, Kansas, was in close proximity to a number of large shippers. The inference intended to be drawn was that it was because of these shippers that the terminal was located in Kansas City, Kansas, and so close to the line between the states of Missouri and Kansas. It might be questioned, however, with a pickup and delivery zone with a radius of 25 miles, if the depot were so positioned as to accommodate heavy shippers whose factories and places of business were nearby. Plaintiff’s pickup zone at Kansas City, Kansas, was so laid out as to cover Kansas City, Missouri. By this device, the plaintiff could carry all the intrastate shipments between St. Louis and Kansas City and extend to the shippers an interstate rate far below the tariffs for purely intrastate hauls. The arrangement could not be justified upon a theory that it was a usual and regular route, as in the case of Missouri Pac. Railroad Co. v. Stroud, 267 U.S. 404, 45 S.Ct. 243, 69 L.Ed. 683, where the court upheld a shipment between points in Missouri as interstate commerce for the reason “that the usual and regular way of routing cars loaded with lumber at Oxly and consigned to St. Louis would be over the latter route through the state of Illinois and would be interstate commerce.” 3. It is a matter worthy of comment that the plaintiff accepted a license from the Public Service Commission which specifically forbade that he should haul property between points in Missouri. The Public Service Commission had promulgated a rule which prohibited the transportation of merchandise between points in Missouri under interstate permits. Such acceptance was a voluntary act on the part of the plaintiff. He had his choice, either to refrain from hauling merchandise and property between points in Missouri under his interstate permit, or to secure a certificate of convenience and necessity as an intrastate carrier. He was not under the compulsion mentioned in Union Pacific R. R. Co. v. Public Service Commission of Missouri, 248 U.S. 67, 39 S.Ct. 24, 63 L.Ed. 131, where the court said that the carrier company was compelled to take out a license or a certificate under the menace of a penalty which meant irreparable loss. The court decided that the complainant’s act in accepting the terms of the certificate was not voluntary. As said in Pullman Company v. Kansas, 216 U.S. 56, loc. cit. 66, 30 S.Ct. 232, loc. cit. 236, 54 L.Ed. 378, “by accepting the privilege, it has voluntarily consented to be bound by the condition.” This principle was upheld in Pierce Oil Corporation v. Phoenix Ref. Co., 259 U.S. 125, 42 S.Ct. 440, 66 L.Ed. 855. Plaintiff would therefore have no right to challenge the validity of the said Rule No. 44. 4. The defendant has filed a supplemental pleading wherein there is a prayer for an accounting of fees accumulated during the operations of the plaintiff since the granting of the original restraining order, December 31, 1936. While the injunction granted by this court prohibited the defendant Public Service Commission from revoking and cancelling plaintiff’s permit as an interstate carrier, such injunction in nowise relieved the plaintiff of the obligation to pay statutory or prescribed license fees. — 593 — No reason appears why such payments should not have been made. On the contrary, there is every reason why the plaintiff in a proceeding in equity should not meet all of the reasonable exactions of the state as condition precedent to the operations carried on by him. Under Equity Rule 30, 28 U.S.C.A. following section 723, a defendant has a right to interpose a counter-claim “arising out of the transaction which is the subject-matter of the suit.” It is doubtful whether these claims arose out of the transaction which is the subject matter of the suit, and, yet, because of the injunction, the plaintiff elected to discontinue the payment of fees. No objection having been made to the filing of the counterclaim, this court will not interpose one under the circumstances of the case. The question having been presented, it should be considered by us. In Piedmont & N. Ry. Co. v. Query, D.C., 56 F.2d 172, loc. cit. 175, the court said in discussing similar questions: “And if either of these is a substantial question under the Constitution, we must proceed with the consideration of the other questions presented; for in such case the jurisdiction of the court extends to every question involved, whether of federal or state law, even though the court may not find it necessary to decide the federal question.” In Sovereign Camp, W. O. W., v. Murphy, D.C., 17 F.Supp. 650, loc. cit. 652, a case like this heard before three judges sitting in the Southern District of Iowa, the court said: “But the duty imposed on the three-judge court * * * carries with it the duty on the part of the same three-judge court to try the whole case. The parties cannot be relegated to piecemeal trials of the several issues joined by them in their case.” The same principle was announced in Greene v. Louisville Railroad Co., 244 U.S. 499, loc. cit. 508, 37 S.Ct. 673, loc. cit. 677, 61 L.Ed. 1280, Ann.Cas. 1917K, 88, where the court said that: “The jurisdiction of that court extended, and ours on appeal extends, to the determination of all questions involved in the case, including questions of state law, irrespective of the disposition that may be made of the Federal question, or whether it be found necessary to decide it at all.” In view of the above, unless the parties can agree after an inspection of the records upon the amount of the accumulated fees, it will be necessary to appoint a master to take an accounting and make his report to the court. The injunction heretofore granted will be dissolved. The parties will be given thirty days from the filing of this opinion to agree upon the amount of the accumulated fees due under the counterclaim. If such agreement is not made within that time or within an extension for that purpose granted within that time, a decree will be entered dissolving the temporary injunction, refusing the permanent injunction and appointing a special master to determine the amount of fees payable under the counterclaim. If such agreement as to fees is reached within the time above allowed, a decree will be entered dissolving the temporary injunction, refusing the permanent injunction, dismissing the bill upon its merits and awarding recovery upon the counterclaim for the amount so agreed upon. Findings of Fact. The court finds from the evidence in the case: 1. That the carriage of property from St. Louis, Missouri, to Kansas City, Kansas, and thence back into Kansas City, Missouri, for delivery, was not the normal, regular, or usual route for shipping merchandise or property between St. Louis and Kansas City, Missouri. 2. That the terminal or depot used by the plaintiff in Kansas City, Kansas, was approximately one-half mile from the Missouri State line by a used trafficway between Kansas City, Missouri, and Kansas City, Kansas. 3. That the route used by the plaintiff from St. Louis, Missouri, to his depot or terminal in Kansas City, Kansas, was through Kansas City, Missouri, and that the same traffieways were used in making deliveries of merchandise or property after same had been hauled in the first instance to the terminal in Kansas City, Kansas, and that such deliveries involved a retracing in part of the identical routes. 4. That, after reaching the terminal or depot in Kansas City, Kansas, plaintiff in many instances did not unload the merchandise, but used the same trailer employed in making the carriage from St. Louis, and hauled said property back over — 594 — the identical route used in going to his depot in Kansas City, Kansas, in making deliveries in Kansas City, Missouri, and North Kansas City, Missouri. 5. That a considerable portion of the operations carried on by plaintiff was in hauling property or merchandise between St. Louis, Missouri, and Kansas City, Missouri, and that much of such shipments was in carload lots, and that the method employed by the plaintiff was to haul such merchandise or property to his depot 'or terminal in Kansas City, Kansas, where a new driver, either with the same tractor and trailer, or with another tractor and the same trailer, would return the merchandise to Kansas City, Missouri. 6. That, in some instances, merchandise or property shipped between St. Louis and Kansas City was actually unloaded at the depot in Kansas City, Kansas, and then distributed to the consignees in Kansas City, Missouri. This, however, was a negligible percentage of the shipments between Missouri points. 7. That, prior to April 1, 1936, deliveries from the Kansas City, Kansas, depot to points in Missouri were made by an independent agency, but that subsequent to said date, such deliveries were made by -plaintiff and are now being made by him. 8. That the rates for interstate carriage between St. Louis, Missouri, and Kansas City, Kansas, were much lower than intrastate transportation tariffs between St. Louis, Missouri, and Kansas -.City, Missouri, and that the expense of delivery from the Kansas City, Kansas depot was not as great as the difference in tariffs. 9. That the method .of operation employed by the plaintiff was designed and intended to afford shippers the benefit of a lower rate, and that the transportation .service rendered by him between St. Louis, Missouri, and Kansas City, Kansas, was not in good faith. 10. That the plaintiff voluntarily accepted an interstate permit with such terms and conditions as prohibited him from hauling merchandise between points in' Missouri, and that permitted him only to carry property in interstate commerce between points in Missouri and points in other states and from points in other states to points in Missouri. 11. That the license fees and other charges made by the State of Missouri against- the plaintiff for the use of the highways of the State of Missouri as an interstate motor carrier during the time the restraining order and temporary injunction of this court have been in force' have accumulated, but have not been paid by the plaintiff although the injunctive relief sought by him did not relieve him, nor was it intended to relieve him, of the obligation to pay such fees and charges, nor did he seek to be relieved of such fees and charges. The court makes the following conclusions of law: I. That the vact of the Public Service Commission in Missouri in cancelling and revoking plaintiff’s permit as an interstate carrier was a valid and a constitutional exercise of its power. II. That the plaintiff had violated the express terms of its interstate permit. III. That the plaintiff has no right to challenge the constitutional validity of Rule Number 44 promulgated by the Public Service Commission. IV. That the plaintiff is indebted to the State of Missouri for license fees and charges accumulated since the granting of a temporary restraining order in this case, and the state is entitled to judgment therefor.