UNITED STATES tI. TRANS-MISSOURI FREIGHT ASSOCIATION.
los,es sight of the distinction existing at the common law between parties following private pursuits and public corporations engaged in public enterprises. . The interstate commerce act did not materially change the rights pertaining to the public. It created certain machinery for the better enforcement and protection of the public interests, but the rights to be protected were already in existence, and the statute in this respect is only declaratory of common law principles. Before the enactment of that statute, railway companies were recognized to be public corporations, charged with the duties and obligations pertaining thereto. As common carriers they were under legal obligation to deal with the public, and to afford equal facilities to every citizen, and they were only entitled to demand rea· sonable, and not exorbitant, compensation for the services rendered by them. The purpose of the interstate commerce act was not so much to change the legal rights of the common carriers and of the public as it was to compel a change in the practices of the railway companies, and to enforce compliance on their part with the duties and obligations which rested upon them under the principles of the common law. The line of argument followed by the majority seems to assume that the main purpose of the interstate commerce act is to regulate the relations between the competing lines of railway, and to protect the weaker lines of railway and the capital invested therein from being absorbed by the stronger competitor. That there are evils of this nature of great magnitude is not to be denied, but the interstate commerce act was not enacted for their eradication. The primary purpose of that act was to deal with the relations existing between the common carriers and the public, and to en· force the rights of the latter. Experience had shown that railway companies had, in many instances, favored particular localities or particular parties or particular classes of business at the expense of the community at large, and the act was, in the language used by the supreme court in Railway Co. v. Goodridge, 149 U. S. 680, 13 Sup. Ct. Rep. 970, intended "to cut up by the roots the entire system of rebates and discriminations in favor of particular localities, special enterprises, or favored corporations, and to put all shippers on an absolute equality." The uniformity and equality of rates sought to be secured by that act are not between the schedules of rates charged by the several companies, but between the charges actually made by each railway company to its patrons. The act does not require the schedule of rates adopted by one company to conform to that of a rival company. What it does demand of each company is that, in dealing with its customers, it shall make no unjust discrimination, but shall, for the like service performed under similar circumstances, charge the same rate to all. The act provides that all charges for the transportation of persons or property from state to state shall be reasonable and just, but no standard for ascertaining whether a given rate is reasonable or not is established by the act. I fail, therefore, to perceive the force of the argument that the
of the interstate commerce act worked a radical change in the relations existing between railway companies and the pub· lie, and that one effect thereof was to authorize the former to combine together for the purpose of escaping the effect of competition upon the rates to be charged the public for the services rendered. Before the adoption of that act the community was cer· tainly entitled to the protection derived from free competition between the linel!! of railway engaged in· interstate traffic, and there is nothing in that act which deprives the public of this safeguard. That act was intended to secure to the public the enjoyment of the pre-existing right to reasonable rates upon interstate commerce, and to defend the public against the evils resulting from unjust discrimination on behalf of favored parties, localities, or classes of business. In the opinion of the court are found citations from the reports of the interstate commission in which are depicted the evils that are occasioned to the railway companies and the public by warfares over rate charges, and the advantages that are gained in many directions by proper conference and concert of action among the competing lines. It may be entirely true that, as we proceed in the development of the policy of public control over railway traffic, methods will be devised and put in operation by legislative enactment whereby railway companies and the public may be protected against the evils arising from unrestricted competition and from rate wars which unsettle the business of the community, but I fail to perceive the force of the argument that, because rail· way companies, through their own action, cause evils to themselves and the public by sudden changes or reductions in tariff rates, they must be permitted to deprive the community of the benefit of competition in securing reasonable rates for the transportation of the products of the country. Competition, free and unrestricted, is the general rule which governs all the ordinary business pursuits and transactions of life. Evils, as well as bene· fits, result therefrom. In the fierce heat of competition the stronger competitor may crush out the weaker. Fluctuations in prices may be caused that result in wreck and disaster, yet, balancing the benefits as against the evils, the law of competition remains as a controlling element in the business world. That free and unrestricted competition in the matter of railroad charges may be productive of evils does not militate against the fact that such is the law now governing the subject. No law can be enacted nor system be devised for the control of human affairs that in its enforcement does not produce some evil results, no matter how beneficial its general purpose may be. There are benefits and there are evils which result from the operation of the law of free competition between railway companies. The time may come when the eompanies will be relieved from the operation of this law, but they cannot, by combination and agreements among themselves, bring about this change. The fact that the provisions of the in· terstate commerce act may have changed in many respects the eonduct of the companies in the carrying on of the public busi·
UNITED STATES 1.'. TRANS-MISSOURI FREIGHT ASSOCIATION.
ness they are engaged in, does not show that it was the intent of congress in the enactment of that statute to clothe railway com· panies with the right to combine together for the purpose of avoiding the effects of competition on the subject of rates. There are three general methods by which these rates may be established. It may be done by direct legislative enactment, (whereby either fixed rates or a maximum or minimum limit are enacted by the statute or by provisions for the adoption of rates by a commission,) or the rates may be adopted by the independent action of each company, acting under the spur of self-interest, and controlled by the effect of free competition, or the rates may be fixed by means of agreements or combinations between the rival lines of railway, whereby each contracting company is bound to charge the rate thus fixed and agreed upon. Congress has not yet undertaken to establish a standard of rates, either directly or through the action of a commission or the equivalent. Neither, in my judgment, has congress, in enacting the ip.terstate commerce statute and the amendments thereto, conferred upon the railways the right to enter into combinations for the purpose of compelling the members to charge the rates fixed by a committee of the association, in whose deliberations the public have no part, and the avowed purpose of which is to evade the operations of the law of competition, which is as yet the only safeguard upon which the public can rely for the securing of. the adoption of reasonable charges upon interstate traffic. I had always supposed that the enactment of the interstate commerce statute was the result of a popular demand, which insisted upon relief being given to the community as against the methods pursued by the railway companies which, in some particulars at least, were deemed to be inimical to the public interests. Looking at the causes which brought about the enactment of this statute, and the evils at which it was aimed, it does seem clear that it is wholly wrested from its purpose when it is held that it creates numerous radical and effective changes in the public policy of the nation touching com· petition between railroad comoanies engaged in interstate commerce. For the better protection of the rights of the public, and to sweep away the system of discriminations in favor of localities, individuals, or classes of business which had come into vogue, the interstate commerce act was intended to introduce radical changes in railway methods, but it never was intended to curtail the rights of the public and eJ;llarge those of the railway corporations in any substantial particular. The argument of the majority is that, even if it were admitted that under common-law principles all contracts or combinations between public common carriers for the establishment of rates would be held to be contrary to public policy, nevertheless the enactment of the interstate commerce act revolutionized the law in this particular, and authorized railway companies to enter into combinations for the purpose of establishing reasonable restrictions upon the freedom of interstate commerce. Reading that act in the light of the causes leading to its enact·
.meat, I cannot find in any of its provisions foundation for the theory that it was intended to confer upon railway companies the, right to enter into combinations which, under the principles of the common law, would be illegal, because contrary to public policy. The reasoning .of the court is to the effect that "the interstate commerce law imposes several important restrictions upon the right of railway companies to do as they please in the matter of making and altering rates, and congress has thereby expressed its conviction that absolutely free competition between carriers is not at the present time conducive to the public welfare, and that other are more essential to the public good." Ido not quarrel with the proposition that the interstate commerce act imposes important restrictions, (not upon the right, however,) but upon the practice of railway companies to do as they please in the matter of making and altering rates. But how does that fact tend to show that the act places restrictions upon the rights of the public? The congress of the T,Jnited States may place restrictions upon the rights of the railway companies and upon the rights of the public, but the fact that congress may enact laws which are intended to change the methods pursued by the companies in certain particulars does not necessarily restlI"ict the rights of the public. But if it be admitted that by some possible mode od' construing the interstate commerce act, and the action of the commission created thereby, it can be held that under its provisions the railway com· panies became clothed with the right to combine together, and by mutual agreement to create restrictions upon the freedom of inter· state commerce, so long as the same are reasonable,-which is the position of the court,-then would it not follow that the right thus created by the interstate commerce act is abrogated by the later enactment found in the anti-trust act, which expressly declares, not that unreasonable contracts, combinations, or restrictions are il· legal, but that every cootract, combination in the form of trust or otherwise, or conspiracy in restraint of trade or commerce among the several states is illegal? The statute declares that restraint of interstate commerce, all restraints, every restraint 01' such trade and commerce brought about by contracts, combinations in the form of trusts or otherwise, or by conspiracy, are illegal. The statutory declaration in effect is that interstate trade and com· merce are to remain free from restriction. The declaration of the court is, in effect, that railway companies engaged in interstate commerce may place restrictions upon such commerce; that the right so to do, if not existing under the common law, is conferred upon ['ailway companies by the provisions of the interstate commerce act; that such restrictions cannot be held to be 'illegal un· less it is shown that they are unreasonable, and the presumption is in favor of their reasonableness and consequent legality. I caDnot believe that such is the meaning of the interstate commerce and the anti-trust acts. When the latter act was adopted, it had been declared by the supreme court of the United States to be the law that, with regard to the classes of business that are of a publ'ic nature, and are carried on to meet a public necessity, conb'cLCts im-
UNITED STATES 'Ii. TRANS-MISSOURIFR'EIGHT ASSOCIATION.
posing restraints thereon, however partial, cannot be sustained, be· cause in contravention of public policy. It cannot be successfully questioned that railway companies engaged in 'interstate trade and commerce are carrying on a business of such a public character as of necessity places it in the dags declared by the supreme court to be of such a nature that no restraint thereof, however partial, is permissible. It is a familiar principle that statutes are to be construed with reference to and in the light of the law existing at the date of their enactment. Thus reading the anti-trust act, is not the first section thereof intended to clearly enunciate in statutory fO'I"Ill the principle already declared to be the law by the supreme court? The interstate commerce and anti-trust acts were passed for the protection of the interests and enforcement of the rights of the public. The view taken thereo1' in the opinion of the court results in curtailing the rights of the public rand in enlarging the powers of railway companies. If the law be as is therein declared, then these public corporations, engaged in carrying on the public duty of constructing and operating the public highways, over which, of necessity, nearly the entire traffic of the country must be carried, are at liberty to combine together and determine in secret conclave the rates they will demand from the public for the services rendered, and enforce the imposition of the schedules thus fixed by penalties assessed against any pacty to the combination which may vary from the agreed schedule, and the individual citizen has no relief against rates thus fixed, unless he can satisfy some court or jury that the rate charged is unreasonable. It is admitted in the opinion of the court that the contract in question h'as some tendency to check competition in rates, but it is said the restraint is 'slight, and therefore lawful. If the natural tendency is to check competition in the matter of rates, and to place a restraint, though but slight, upon the freedom of interstate traffic, what tribunal is to detel"1lline when the proper boundary has been passed, and by what standard is the lawfulness of the restraint to be measured? The legal consequence of the pos'ition of the court is that railwray companies, by combinations between themselves, may fix the schedule of rates to be charged the public, and may bind themselves under penalties not to depart from the rates thus agreed upon, and the citizen is bound to pay the tariff thus established, unless he can satisfy a court that the sum charged is unreasonable. It may sound well to say that the courts are open to the citizen, and that they will afford him protection against'the exaction of unreasonable rates, but we know that the supposed remedy would only aggravate the original wrong. It is said in the opinion of the court that there is nothing in the. contract described in the bill which indicates any purpose or attempt to obtain a monopoly of the trade of the region traversed by the defendant corporations; that the systems of the Great Northern, the Northern Pacific, the Southern Pacific, and Texas Pacific Railway Companies are operated in the region subject to the regulations of the defendant association, but they are not members of it, and therefore the defendant com· panies cannot monopolize the entire traffic of the region. Thegreat v.58F.no.1-7
majority of the patrons of the several lines of railway represented in the association in question do not live at competitive points. As . to each of them the line of railway nearest to them has, of necessity, an absolute monopoly of the caJ.TYing trade belonging to the business in which they are engaged. Of what advantage to a farmer,R merchant, or a manufacturer doing business .at or adjacent to a station upon a given line of ra'ilway is the fact that 20 ()[' 50 or 500 miles ,from his place of business there is another railway line? The distance is so great, and the cost. of reaching the same is so great, thai; he is practically debarred from making use of the same, and he has no choice in the matter. Parties doing business at competitive points may have free choice, and as to them it may be true that neither' competing line has a monopoly of the business transacted .at places where competition, being free and unrestricted, may work out its legitimate results, but this is not true of persons engaged in business at noncomMtitive po'ints. As to them, the control of the railway company adjacent to them is practically absolute. Of necessity, in such case the railway compa;ny has a complete monopoly of the entire transportation traffic of the region in which there is in fact no competing line. Against the evil tendencies of this monopoly, protection is afforded to the citizen by securing free and unrestrained competition between the lines of railway at the several points or localities where they in fact come into active competition, and, reasonable rates having thus been secured at these points, we have a standard established by which it may be determined whether the rates. charged from intermediate noncompetitive points are reasonable or not, and the provisions of the interstate commerce act forbidding a greater charge for a shorter than a longer haul under similar circumstances may be invoked to secure a proper proportionate relation between the rates at competitive and noncompetitive points. If, however, the railway companies may combine together to fix the rates to be charged at competitive points, thus eliminating the effect of free competition, how fares it witlf the citizen residing at the noncompetitive point? By the very necessities of his location he is debarred from choosing the line of railway he will patronize. He is compelled to avail himself of the facilities afforded by the line nearest him. The railway therefore has the absolute monopoly of the transportation pertaining to the business of the citizen. It likewise has,the exclusive control of the rates to be charged; and if the company, by contracts and combinations with the other lines of railway operating in the same region, may free itself from the restrictions afforded by free competition, what is lacking to constitute a complete and absolute monopoly of the transportation business thus dependf'nt upon the given line of railway? The direct and necessary consequence of the contract entered into by the defendant companies is to create and perfect an absolute monop()ly in each of the contracting parties over that part of the business carried olver their respective lines which comes from that portion of the territory 'in which there is not in active operation a competing line; and, even as to regions which are so situated that competition might be had in the absence
UNITED STATES'll. TRAN5-MISSOUm FREIGHT ASSOCIATION.
of contracts preventing the effects thereof, a like monopoly is created by the contJroact entered into by the defendant companies. In the matter of rates, competitive points are those where the transportation business of the locality is sought by two or more competing lines. In the case of sales of property at public auotion, it is the rule that combinations among proposed purchasers, whereby it is agreed that they will not bid against one another, but the property shall be bid off at an agreed price for the common benefit of all the contracting parties, are illegal, and a sale thus made is voidable, because all fair competition is prevented by such combination. If the competitors for the transportation business of a given locality agree that there shall be no competition between them on the subject of rates to be charged, does not the same evil result? In the one case it is sought to deprive the owner of his property, without paying to him the fair value that would probably be bid in case competition was not stifled by the agreement between the purchasers. In the other the citizen is subjected to the payment of charges which are not the result of free competition, but are the result of combinations and mutual agreements, entered into for the express purpose of eliminating competition as an element in the determination of the rate to be charged. Thus points and localities which are competitive so long as there is active rivalry between the railway lines seek· ing the business of the region cease to be such when the rival lines combine and become, in effect, but one upon the subject of the charges to be demanded of the citizens. In such event the citizen becomes subject to a monopoly as complete and absolute as though there was but a single line of railway within his reach. Thus is found in the contract and combination entered into by the defendant companies elements which directly tend to the esttl blishment of a monopoly, complete and absolute, over the transportation traffic in the region traversed by the lines of the dp· fendant companies, due to the undeniable fact that the price charged for the transportation of the property of the community influence over the question of the suc-.;ess exercises a or failure of the various business pursuits and avocations upon which the citizens are dependent for a livelihood, and, morcol-er, it directly affects and controls the cost to the public of aU the of life. The declaration found in article I of the contract shows upon its face the main purpose of the combination, it being therebl rethat ((the traffic to be included in the Trans-Missouri Freighr Association shall be as follows: (1) All traffic competith'-e between any two or more members hereof passing between points in the following described territory," etc. Does not this clearly show that the main purpose of the contracting parties is to df'ul with that traffic which, in the absence of combinations between the railway companies, would be controlled by the results of competition, and to deal with it in such manner that it will cease to be competitive traffic and become the subject of combinations and agreements whereby the rates to be charged-which is the essential ele-
ment in which the public has a vital interest-is removed from the, protection derivable from free and unrestrained competition, and is left to the determination of committees appointed by the railway companies, whose action is binding upon the members of the association, and against which the individual citizen is without adequate remedy, no matter how unjust the rate fixed by the committee may in fact be? Another feature observable. on the face of this contract is that by the exceptions contained in article I the traffic between many points and in some classes of freight are excepted out from the operation of the agreQolIlent, and thus it appears that it is the express purpose of the defendant companies to carryon part of their business subject to the resUlts flowing frQm combinations between the' carriers, and other portions are not to be affected thereby. Is it not the natural result that the public will be subjected to different burdens. and that differences in rates will be charged, which in effect will resUlt in discriminations for or against particular localities? But I shall not dwell upon this and other points of minor importance. As I view the subject, the .inherent and fatal vice existing in the combination and agreement entered into between the defendant railway companies is found in the fact, patent upon the face of the contract, that it is the main purpose of the contracting parties to stifle competition in the matter of rates to be charged the public. The illegality of such purpose is not dependent upon the extent of the restraint placed upon the freedom of the public business, but upon the fact that the avowed intent is to place a restraint, whether slight or great, upon a class of business which is inherently and always of a public nature, and touching which the declaration of the law, both common and statutory, is that it must remain wholly free and unrestricted. If the protection afforded by fair and free competition can be evaded and nullified by means of combinations such as are contemplated and provided for in the contract entered into by the defendants in this case, then the only safeguard against unreasonable rates will be stricken down, and thus interstate commerce will be subjected to the restraints and injuries flowing from the imposition of tariff rates agreed upon by the companies, but in the establishment of which the public has no direct control through legislation, nor direct influence through the effect of free competition. In my judgment, the right to insist upon free competition between railway companies engaged in carrying on interstate commerce is a right which belongs to the public, of which it f.'llunot be deprived except by its own consent, and every contract or cuUl· bination between these public corporations which tends to remove the business carried on by them fr9m the influence of free competition tends to deprive the public of this right, of necessity tends to j:jubject interstate commerce to burdens which are a restraint thereon, is inimical to the public welfare, is contrary to policy, and in contravention of both the language and spirit of the anti-trust act of July 2, 1890.
WARREN V. BURT.
WARREN v. BURT et 81. (Clrcult Court of Appeals, Eighth Circuit. September 18, 1893.) No. 177.
PRINCIPAL AND AGENT - INTEREST OF AGENT IN PURCHASE FROM PRINCIPALACCOUNTING TO PRINCIPAL FOR PROFITS.
In a suit to compel a real-estate agent employed by plaintiffs, former owners of a farm in Illinois, to pay plaintiffs certain profits derived by them from an exchange negotiated by the agent, and to cancel a contract made in payment of his commissions, it a.ppeared that the agent showed plaintiffs a tract of land in Missouri which had been for sale tor years at $9,000. stated it to be worth at least $32,000, and persuaded them to contract for an excha.nge of properties with one of the defendants, having no interest in the tract, falsely stated by him to be 1Ihe owner's agent. Another defendant obtained an option on the tract for $9,500. and thereafter conveyed it to plaintiffs in fulfillment of the contract, and received a conveyance of the farm. To facilitate the exchange, still another defendant loaned plaintiffs the cash requisite to carry out the contract, and took back a trust deed therefor, and the agent waived his commission in cash, and took in lieu thereof a contract for one-half the profits to be derived from a future sale of the property. Subsequently, the agent traded the Illinois farm at a profit of about $8,000, which was divided among all the defendants, the agent receiving $1,050. Defendants had previously operated together in other "real-estate deals," and divided the profits. Held, that the agent's ignorance or concealment of the ownership or price of the Missouri tract, his waiver of cash commission, and his receipt of a share of the profits of the farm largely in excess of the usual commission were sufficient proof that he was interested in forwarding the schemes of his codefendants for a share in the profit, and entitled plaintiffs to the relief sought against him.
Appeal from the Circuit Court of the United States for the Eastern District of Missouri. In Equity. Bill by Robert F. Burt and Charles Scudder, public admiuistrator in charge of the estate of Robert H.'Gardner, against Thomas H. Warren, Frank G. Flanagan, Benjamin F. Hammett, Charles Hewitt, and Benjamin F. Webster, for an accounting of profits realized by the trade of a farm formerly belonging to Burt and Gardner, and to cancel a contract between them and defendant Warren. The bill was dismissed as to the defendants other than· Warren, and he appeals from a decree against him in favor of plaintiffs. Affirmed. Statement by SANBORN, Circuit Judge:
This is an appeal from a decree against Thomas H. Warren, a real-estate agent, directing him to pay back to his principals certain profits he derived from the purchase of property of theirs he was selling as their agent, and canceling a certain contract he took from them in payment of his commission. Robert F. Burt, one of the appellees, brought the bill for this relief against Warren, and Frank G. Flanagan, Benjamin Hammett, Charles Hewitt, and Benjamin F. Webster, who were alleged to be associates of 'Warren in the purchase, and he joined as a defendant Charles Scudder, the public administrator of the estate of Robert H. Gardner, the other principal. who had died. The suit arose from these facts: On October 13,1882, Burt and Gardner owned a farm of 285 acres situated in :Madison COUIlty, Ill., a few miles from the city of St. Louis, Mo. They resided in Columbus, OWo, and had employed the appellant, Warren, who resided in St. Louis, Mo., to negotiate a sale or exchange of their farm, and had agreed to pay him a commission of 5 per cent. on the price at which such sale or