Gamble-Robinson Commission Co. v. Chicago & N. W. Ry. Co.

SANBORN, Circuit Judge (after stating the facts as above). Section 3 of the act of February 4, 1887, commonly called the “Interstate Commerce Act,” provides: “That it shall he unlawful for any common carrier subject to the provisions of this act, to make or give any undue or unreasonable preference or advantage to any particular person, company, firm, corporation or locality, or any particular description of traffic in any respect whatsoever, or to subject any particular person, company, firm, corporation or locality, or any particular description of traffic, to any undue or unreasonable prejudice or disadvantage in any respect whatsoever.” 24 Stat 380, c. 104 (3 U. S. Comp. St. 1001, p. 3155). Is it a violation of this section for a common carrier which customarily delivers to consignees a certain class of freight, holds the, freight bills until after any question arising concerning the correctness, of any transportation charges upon its line and upon connecting lines over which the freight has been transported has been adjusted, and then collects them, to refuse to grant such a credit to a particular consignee and to require prepayment of freight bills by it while it still continues to extend credit to others similarly situated ? In other words, is it a violation of this section for a railroad company to refuse to loan to one consignee without interest the moneys owing to it for transportation charges earned by it and for those paid by it to connecting lines until the consignee’s claims that such charges are incorrect have been settled, when it customarily makes such loans to other con- . signees ? This is the question which this case presents, and it is well to perceive clearly the nature of the controversy inherent in it and the. amount actually involved before entering upon the discussion of the issue it presents. The plaintiff is a commission company dealing in perishable products, such as fruit, vegetables, farm and dairy products, claims for errors in the transportation charges upon which and for damages from the transportation of which frequently arise and are met with great difficulty after the products have been delivered. The plaintiff alleges that it is the custom of the terminal carriers to advance the transportation charges upon such products to connecting lines, to deliver the products to the consignees, “and afterwards to collect the reasonable and proper charges for transportation, and, in case of any question arising as to correctness of any transportation charge upon the line of the terminal or any connecting carrier, such terminal carrier takes the matter up for adjustment and holds the freight bills until an adjustment is made,” and that the defendant has refused to follow this custom and has demanded of it prepayment of the transportation charges on the freight consigned to it, and has refused to accept the freight without such prepayment, although it follows the custom in the treatment of its competitors similarly situated. It further alleges — 164 — that the sum paid by it to the defendant for its transportation charges- and those of connecting lines has amounted to several thousand dollars per month. A liberal interpretation of several thousand in this pleading is three thousand, and the complaint fails to show that the actual amount involved here is more than the interest on $3,000, for by the deposit with the railroad company at the commencement of each, month of $3,000 to prepay its charges for freight during that month all of its alleged $50,000 damages would have been avoided. In the light of these facts, we turn to the question of law to be determined. There is a statute of the state of Minnesota which declares that it is unlawful for any common carrier to make or give any unequal or unreasonable preference to any person or corporation, or to subject any person or corporation to any unequal or unreasonable prejudice (Rev. Raws Minn. 1905, § 2009), and counsel argues that his complaint states. a cause of action under this statute. There is, however, no averment in it of any diversity of citizenship of the parties or of any ■ other ground of jurisdiction of a national court over a cause of action for the violation of this state statute, and for that reason the question .whether or not the facts alleged disclose a disregard of that law was-not judicable in the court below and is not so here, and it is dismissed without further consideration. Little Rock & Memphis R. Co. v. St. Louis S. W. Ry. Co., 11 C. C. A. 417, 419, 63 Fed. 775, 777, 26 L. R. A. 192. Prior to the enactment of the act of February 34, 1887, to regulate commerce among the states, interstate railway traffic was regulated by the principles of the common law, and under those principles common carriers had the right to require the prepayment of charges for freight of one or more persons or corporations, and to give credit for such charges to other persons or corporations similarly situated. Interstate Commerce Commission v. Baltimore & Ohio R. R. Co., 145 U. S. 263, 275, 12 Sup. Ct. 844, 36 L. Ed. 699; Southern Indiana Express Co. v. United States Express Co. (C. C.) 88 Fed. 659, 662; Randall v. Railway Company, 108 N. C. 612, 13 S. E. 137. That act left common carriers free to exercise to their full extent all the rights and privileges they had under the common law, so far as these rights and privileges and their exercise were not rendered unlawful by the provisions of that act. That act did not make all preferences, advantages, prejudices, or disadvantages unlawful, but those only which are “undue and unreasonable.” Atchison, Topeka & Santa Fé R. R. Co. v. Denver & New Orleans R. R. Co., 110 U. S. 667, 673, 680, 682, 4 Sup. Ct. 185, 28 L. Ed. 291, in which the Supreme Court held that under the Constitution of Colorado, which-prohibited any undue or unreasonable discrimination in charges or facilities, the refusal of the Santa Fé Railroad Company to stop its passenger trains at a junction of the railroad of the New Orleans Company with its railroad, to carry passengers and freight from that point at the same rate which it would receive if the passengers or freight were carried from the junction of the Santa Fé Company and the Denver & Rio Grande Railway Company in the same town, and to grant to the New Orleans Company through billing, through routing, through ticketing, and through checking of baggage, when it granted — 165 — all these things to the Denver & Rio Grande Railway Company, a competitor of the New Orleans Company, was no violation of this Constitution, because the preferences, advantages, prejudices, and disadvantages thus created, though clearly discriminatory, were not undue or unreasonable. Although the opinion in this case was not a construction of the interstate commerce act, it interpreted a provision in the Constitution of Colorado identical in effect with the paragraph in the third section of that act under consideration, and furnished the standard for its construction, as Judge Jackson declared in Kentucky & I. Bridge Co. v. Louisville & N. R. Co. (C. C.) 37 Fed. 567, 629, 2 L. R. A. 289. Interstate Commerce Commission v. Baltimore & Ohio R. R. Co., 145 U. S. 263, 276, 12 Sup. Ct. 844, 848, 36 L. Ed. 699, where the Supreme Court held that the charge of a less rate for the transportation oí 10 or more persons on a party rate ticket than was charged a single individual, although it created clear inequality and discrimination, did not give to the former an undue or unreasonable preference or subject the latter to an undue or unreasonable disadvantage within the meaning of the third section of the act under consideration, and said, “It is not all discriminations or preferences that fall within the inhibition of the statute; only such as are unjust or unreasonable” — • page 276 of 145 U. S., page 848 of 12 Sup. Ct. (36 L. Ed. 699), affirming Interstate Commerce Commission v. Baltimore & Ohio R. R. Co. (C. C.) 43 Fed. 37, 46, 47. Interstate Commerce Commission v. Detroit, Grand Haven & Milwaukee Ry. Co., 167 U. S. 633, 644, 17 Sup. Ct. 986, 42 L. Ed. 306. Oregon Short Line & U. N. Ry. Co. v. Northern Pacific R. Co. (C. C.) 51 Led. 465, 466, 467, 472, 473; Oregon Short Line & U. N. Ry. Co. v. Northern Pacific R. Co., 9 C. C. A. 409, 410, 412, 413, 61 Fed. 158, 159, 161, 162. In this case the Northern Pacific Company, which owned a railroad from Portland, Or., to Seattle, Wash., and St. Paul, Minn., refused to receive and transport freight originating east of the 97th meridian and destined to points on its own line and on its connecting lines north of Portland tendered to it by the Short Line Company when such freight was in cars other than its own, unless the Short Line Company would pay to the owner of the cars the usual car mileage for their use, or would transfer such freight from the foreign cars into those of the Northern Pacific Company at Portland, and it also refused to transport such freight unless its charges from Portland to destination were paid, and refused to pay upon receiving the freight the charges due to the Short Line Company and its connecting lines for transporting this freight to Portland, while at the same time it received and transported freight originating west of the 97th meridian without any of these conditions, and paid the charges for its transportation to Portland, and it also received and transported freight originating both east and west of said meridian for the Southern Pacific Company without making any of these exactions. The Northern Pacific Company also refused to transport passengers destined to Puget Sound and other points on its lines upon through tickets from points east of the 105th meridian issued by the Short — 166 — Line Company, although it received and transported passengers on through tickets issued by that company from, points west of that line and on through tickets issued by the Southern Pacific Company from all points. Mr. Justice Field, in the Circuit Court and the Circuit Court of Appeals, decided that, while these acts constituted clear discriminations, they created no undue and unreasonable preferences, advantages, prejudices, or disadvantages, and hence that they were not violative of the interstate commerce act. Little Rock & Memphis R. Co. v. St. Louis, Iron Mountain & Southern Ry. Co., Same v. St. Louis S. W. Ry. Co., Same v. Little Rock & Ft. Smith Railway Co. (C. C.) 59 Fed. 400, 406; Id., 11 C. C. A. 417, 63 Fed. 775, 26 L. R. A. 192. In these cases the complainant was the Little Rock & Memphis Railroad Company. The St. Louis, Iron Mountain & Southern Railway Company refused to receive any freight from the complainant at Little Rock without a prepayment of charges, not because it was unwilling to extend credit, but from a desire to oppress that company, while it received freight at that point from all other persons and corporations without the prepayment of charges. The •St. Louis Southwestern Company and the Little Rock & Ft. Smith Railway Company refused to honor through tickets or through bills . of lading issued by the complainant, or to enter into any arrangement for through billing or through rating, while they honored such bills and tickets and made such arrangement with other railroad companies similarly situated. They also refused to accept and transport loaded cars coming from the complainant’s railroad, and required the freight to be rebilled- and reloaded into their own cars at points of junction, while they accepted and transported loaded cars coming under similar circumstances from the roads of other companies without any rebill-ing or reloading. Although these acts clearly gave preferences and advantages to the other companies similarly situated, and subjected the complainant to prejudices and disadvantages, the Circuit Court and this court, after exhaustive argument and upon careful consideration, held that these were neither undue nor unreasonable, and that they constituted no violation of the interstate commerce law. No contrary decision of the Supreme Court, or of any of the Circuit Courts of Appeals, of any of the questions decided by the cases which have just been reviewed, has come to our attention, but the decisions in those cases have been repeatedly followed. Prescott & A. C. R. Co. v. Atchison, Topeka & Santa Fé R. Co. (C. C.) 73 Fed. 438, 439; Central Stockyards Co. v. Louisville & Nashville Ry. Co., 192 U. S. 568, 570, 571, 24 Sup. Ct. 339, 48 L. Ed. 565; Louisville & Nashville R. R. Co. v. West Coast Naval Stores Co., 198 U. S. 483, 497, 498, 25 Sup. Ct. 745, 49 L. Ed. 1135. General statements that there must be no difference in charges not based on difference in service, that rates must be equal to all under like conditions, and that unjust and unreasonable discrimination is forbidden may be found in the opinions of the courts and of the Interstate Commerce Commission in cases in which they were discussing radical differences in the direct charges for transportation 'under like conditions (Western Union Telegraph Co. v. Call Publishing Co., 181 U. S. 92, 100, 21 Sup. Ct. 561, 45 L. Ed. 765; Cincinnati, New Or — 167 — leans & Texas Pacific Ry. Co. v. Interstate Commerce Commission, 162 U. S. 181, 16 Sup. Ct. 700, 40 L. Ed. 935; United States v. Vacuum Oil Co. [D. C.] 153 Fed. 598, 606, 607; Hays v. Pennsylvania Co. [C. C.] 12 Fed. 309; Tift v. Southern Railway Co. [C. C.] 123 Fed. 789, 791; Scofield et al. v. Lake Shore & Michigan Southern Ry. Co., 2 Interst. Com. R. 67; Daniels v. Chicago, Rock Island & Pacific Ry. Co., 6 Interst. Com. R. 458; Page v. Delaware, Lackawanna & W. R. R. Co., 6 Interst. Com. R. 548; St. Louis Hay & Grain Co. v. Mobile & Ohio R. R. Co., 11 Interst. Com. R. 90, 101), and in cases in which the carriers absolutely refused to carry the property tendered on any terms, as in Crescent Liquor Company v. Platt (C. C.) 148 Fed. 894, 903, or to furnish cars at proper times and places where the rates were the same, as in Castle v. Baltimore & Ohio R. R. Co.,. 8 Interst. Com. R. 333, 344. Opinions of state courts may also be cited under statutes which depart from the language and the true interpretation of the Interstate commerce act, and require certain carriers to grant “equal terms, facilities, accommodations and usages,” and forbid them from “granting any terms, credit, privileges, advantages, usages or facilities” to one that are not granted to all (Burns’ Ann. St. Indiana 1901, § 3312b), which hold that every person or corporation is lawfully entitled to every privilege and courtesy extended to any other similarly situated, so that under these statutes and decisions no carrier may waive any right or extend any courtesy to any person or corporation without becoming legally bound to do likewise to every other person or corporation under similar conditions, and under this statute of Indiana there is even a decision that if a corporation customarily waives its right to prepayment of freight, paj^s charges of connecting carriers, and grants credit, it is required by that statute to do so for all. Adams Express Company v. State, 161 Ind. 328, 67 N. E. 1033, 1039. But such are not the terms and such is not the meaning or the effect of the interstate commerce act. The true interpretation of that act is illustrated by the decisions which have been reviewed. It was expressed by Judge Jackson, afterwards Mr. Justice Jackson of the Supreme Court, in Interstate Commerce Commission v. Baltimore & Ohio R. R. Co. (C. C.) 43 Fed. 37, in these words, which have been subsequently three times affirmed and adopted by the Supreme Court of the United States as the true interpretation of this law: “Subject to the two leading prohibitions that their charges shall not be unjust or unreasonable, and that they shall not unjustly discriminate, so as to give undue preference or disadvantage to persons or traiiic similarly circumstanced, the act to regulate commerce leaves common carriers as they were at the common law, free to make special contracts looking to the increase of their business, to classify their traffic, to adjust and apportion their rates so as to meet the necessities of commerce, and generally to manage their important interests upon the same principles which are regarded as sound, and adopted in other trades and pursuits.” Interstate Commerce Commission v. Cincinnati, New Orleans & Texas Pacific Ry. Co., 107 U. S. 479, 493, 17 Sup. Ct 896, 42 L. Ed. 243; Cincinnati, New Orleans & Texas Pacific Ry. Co. v. Interstate Commerce Commission, 162 U. S. 184, 196, 197, 16 Sup. Ct. 700, 40 L. Ed. 935; Interstate Commerce Commission v. Baltimore & Ohio R. R. Co., 145 U. S. 263, 12 Sup. Ct. 844, 36 L. Ed. 699; Interstate Commerce Commission v. Alabama Midland Ry. Co., 168 U. S. 144, 173, 18 Sup. Ct. 45, 42 L. Ed. 414. — 168 — The question, therefore, is, did the defendant subject the plaintiff to any undue or unreasonable prejudice or disadvantage by requiring it to prepay the charges on its freight while the carrier customarily transported freight for others similarly situated without such prepayment? The defendant had the right under the common law to dema'nd prepayment of its charges of the plaintiff and to grant credit to others for similar charges. It had the same right in this regard that every merchant, every man, and every corporation has to grant credit to one or to all but one, and to refuse it to others or to him. There was nothing unjust or morally wrong in the exercise of this right, because the plaintiff had no moral rig’ht to the extension of credit, and justice did not require that the defendant should grant to the plaintiff the same credit that it extended to others. The interstate commerce act did not expressly deprive the defendant of this right or make its exercise unlawful; so far as its express provisions are concerned, it left the right and its exercise among those which the Supreme Court declared that carriers were free to exercise and to manage upon “the same principles which are regarded as sound, and adopted in other trades and pursuits.” The refusal to extend credit to a purchaser of goods, or of transportation, of financial responsibility, credit, and reputation equal to those of others to whom such credit is extended does not in the nature of things subject him to an undue or unreasonable prejudice or disadvantage,, while a requirement that such a vendor shall extend equal credit to all purchasers of equal financial responsibility, credit, and reputation, would subject him to unreasonable and undue disadvantage. Reason, sound business principles, and the practice of the business world give the option to extend credit to the seller of his property, or his services, and to the loaner of his money, and not to the purchaser or borrower. There are other considerations besides financial responsibility, credit, and reputation, which condition the rational extension of credit, such as the experience of the seller or the loaner, the habits of the purchaser or the borrower, his fairness and promptness. The plaintiff avers that the defendant customarily gives credit to all other responsible and reputable business houses, and that it is a house of that character. Fruit, vegetables, farm and dairy products are perishable in their nature, of a character which renders them susceptible to claims for errors in ‘charges for transportation and for damages during transportation. The usage and custom alleged is that the defendant, the terminal carrier, advances to connecting lines their charges upon these products, delivers them to the consignees, holds the bills for the charges for freight until claims arising from alleged errors therein are adjusted, and then collects them of the consignees. It is not inconceivable that a consignee might present under this usage such claims for errors in charges and for damages in transportation, and might so delay their adjustment and the payment of the charges for freight, that it would thereby secure a much greater advantage and preference over other consignees than the prejudice or disadvantage it would suffer by prepaying its charges for freight. — 169 — It is said, however, that the fact that a custom and usage exists not to require the prepayment of such charges renders the requirement of prepayment by the plaintiff, while others are given credit under like circumstances, the imposition of an undue and unreasonable disadvantage and prejudice upon it. But since the requirement of the prepayment of the charges for freight by the plaintiff while others similarly situated are granted credit for these charges subjects the plaintiff to exactly the same degree of prejudice and disadvantage in the absence of such a custom and usage as it does in its presence, the existence of the custom or usage cannot make that prejudice or disadvantage undue or unreasonable if it would not be so if the custom or usage did not exist. Oregon Short Line & U. N. Ry. Co. v. Northern Pacific R. R. Co. (C. C.) 51 Fed. 465, 472; Gulf, C. & S. F. Ry. Co. v. Miami S. S. Co., 30 C. C. A. 142, 155, 86 Fed. 407, 420; Little Rock & Memphis R. Co. v. St. Louis S. W. Ry. Co., 63 Fed. 775, 11 C. C. A. 417, 26 L. R. A. 192. An attempt has been made in argument to distinguish these and other cases in which the requirement of prepayment of charges for transportation by one while no such requirement was made of others has been held to create no undue preference or disadvantage from the case in hand, upon the ground that those were actions by railroad companies while this is an action by a shipper, or by a consignee of a shipper; but an undue or unreasonable prejudice or disadvantage inflicted upon a railroad company falls under the ban of the law as completely as an undue prejudice or disadvantage imposed upon a shipper or a consignee, and it is more deleterious by as much as all the shippers or consignees over the lines of that carrier affected by it are more numerous than a single shipper or consignee, and by as much as the charges for the transportation of their freight are greater than his. Injury to a class by a violation of the interstate commerce act is far more damaging than to a single member of a class. Crescent Liquor Co. v. Platt (C. C.) 148 Fed. 894, 901. One of the averments of the plaintiff in his complaint is that the defendant required the plaintiff to prepay its freight, and gave notice to that effect, for the express purpose of harassing and annoying the plaintiff and injuring its business. But the sole question in this case is whether or not the requirement of the prepayment of the charges for freight constituted a violation of the interstate commerce act. If it did, a noble purpose or a good motive constitutes no defense to the cause of action founded upon it. If it did not, a bad motive or an evil purpose creates no cause of action founded upon the exercise of a legal right. “An act which docs not amount to a legal injury cannot he actionable because it is done with a bad intent.” Boyson v. Thorn, 98 Cal. 578, 33 Pac. 492, 21 L. R. A. 233; Cooley on Torts, pp. 1503, 1505. Finally, the question at issue in this case in the presence of a custom and usage not to demand prepayment of transportation charges, in the presence of a motive and purpose by the defendant to harass and oppress the plaintiff by the demand of such prepayment, and in the presence of the subjection of the plaintiff in that case to very — 170 — much more aggravated prejudice and disadvantage than those alleged in the action under consideration, was presented, decided, and the considered opinion of this court upon it was delivered by Judge Thayer in 1894 in these words: ■ “It will be observed that the sole question in tbe cases filed against the St. Louis, Iron Mountain & Southern Railway Company concerns the right of that company to require the prepayment of freight charges on all property tendered to it for transportation at Little Rock by the Little Rock & Memphis Railroad Company, while it pursues a different practice with respect to freight received from other shippers at that station. At common law a railroad corporation has an undoubted right to require the prepayment of freight charges by all its customers, or some of them, as it may think best. It has the same right as any other individual or corporation to exact payment for a service before it is rendered, or to extend credit. Oregon Short Line & U. N. Ry. Co. v. Northern Pacific R. Co. (C. C.) 51 Fed. 465, 472. Usually, no doubt, railroad companies find it to their interest, and most convenient, to collect charges from the consignee; but we cannot doubt their right to demand a reasonable compensation in advanee for a proposed service, if they see fit to demand it. This common-law right of requiring payment in advance of some customers, and of extending credit to others, has not been taken away by the interstate commerce law, unless it is taken away indirectly by the inhibition contained in the third section of the act, which declares that an interstate carrier shall not ‘subject any particular person, company, corporation or locality * * * to any undue or unreasonable * * * disadvantage in any respect whatever.’ This prohibition is very broad, it is true, but it is materially qualified and restricted by the words ‘undue or unreasonable.’ One person or corporation may be lawfully subjected to some disadvantage in comparison with others, provided it is not an undue or unreasonable disadvantage. In view of the fact that all persons and corporations are entitled at common law to determine for themselves, and on considerations that are satisfactory to themselves, for whom they will render services on credit, we are not prepared to hold that an interstate carrier subjects another carrier to an unreasonable or undue disadvantage because it exacts of that carrier the prepayment of freight on all property received from it at a given station, while it does not require charges to be paid in advance on freight received from other individuals and corporations at such station. So far as we are aware, no complaint had been made of abuses of this character'at the time the interstate commerce law was enacted, and it may be inferred that the particular wrong complained of was not within the special contemplation of Congress. This being so, the general words of the statute ought not to be given a scope which will deprive the defendant company of an undoubted common-law right, which all other individuals and corporations are still privileged to exercise, and ordinarily do exercise.” Little Rock & Memphis R. Co. v. St. Louis S. W. R. Co., 63 Fed. 777, 11 C. C. A. 419 (26 L. R. A. 192). The question was decided in the same way by Mr. Justice Field in the Circuit Court in Oregon Short Line & U. N. Ry. Co. v. Northern Pacific R. R. Co., 51 Fed. 465, 473, 474, affirmed by the Circuit Court of Appeals of the Ninth Circuit in 9 C. C. A. 409, 410, 412, 413, 414, 61 Fed. 158, 159, 161, 162, and by the Circuit Court of Appeals of the Fifth Circuit in Gulf, C. & S. F. Ry. Co. v. Miami S. S. Co., 30 C. C. A. 142, 154, 155, 86 Fed. 407, 419, 420. It is more than 14 years since this court rendered that decision, no contrary opinion of any national court upon this question has been called to our attention, and because the right of a common carrier to require prepayment of charges for transportation' from one and to give credit for them to another similarly situated existed under the common law, because neither this right nor its exercise were made unlawful by the terms — 171 — of the interstate commerce act, because the exercise of that right is not in itself unreasonably prejudicial, or disadvantageous, because the former decision of this court rules this case and ought not to be overruled unless it is clearly wrong, and because upon a careful reconsideration of that decision in the light of the subsequent decisions of the courts we are still convinced that it was right, our conclusion in this case is that the requirement by the plaintiff of the .prepayment of charges by the defendant for the transportation of its freight, while no suc.h requirement was made of others similarly situated, while there existed a custom or usage for the carrier to advance the charges of connecting carriers, to deliver the freight to the consignees, to hold bills for freight until claims arising out of errors in transportation charges were adjusted, and then to collect them, did not subject the plaintiff to undue or unreasonable prejudice or disadvantage or give to others similarly situated any undue or unreasonable preference or advantage within the meaning of section 3 of the interstate commerce law, and the judgment below must be affirmed. It is so ordered.