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United States Supreme Court


No. 296

Argued: May 06, 1913Decided: May 06, 1913

Docided June 9, 1913.

Messrs. Luther M. Walter, W. E. Hemingway, M. W. Borders, J. E. Louthborough, D. H. Cantrell, G. B. Rose, and U. M. Rose for plaintiff in error. [230 U.S. 316, 317]   Messrs. Charles C. Reid and T. M. Mehaffy for defendant in error.

[230 U.S. 316, 318]  

Mr. Justice Lamar delivered the opinion of the court:

The Bryant Lumber Company had its mill and sawmill plant at or near Bigelow, Arkansas, on the Rock Island Railroad. The Fourche Lumber Company's plant was located near by on a spur track laid about a mile from the main line of the Rock Island R. R. Both of these lumber companies owned timber in a rough, hilly country which could only be reached by a railroad belonging to the Bryant Company. The Fourche Lumber Company had already built a road on this land, claiming that it had been granted a right of way by the Bryant Company, and had applied for a railroad charter. This application was resisted by the Bryant Company, which denied that it had made any grant of a right of way. Finally, and in order to avoid threatened litigation, the parties, in August, 1905, entered into an agreement in which, among many other matters, it was provided that a charter should be granted to the Fourche River Valley & Indian Territory R. R., to be organized by the Fourche Company; that the Bryant Company would grant this Fourche Railroad a right of way, and that the Fourche Compony was to [230 U.S. 316, 319]   arrange for the building of switches to enable the Bryant Company to reach its timber, which was to be transported at 37 1/2 cents per 1,000, and that 'the price for hauling futureacquired lumber of the Bryant Company over the Fourche R. V. & I. T. R. R. should be fixed by a board of arbitrators, who should have authority to settle any differences that might arise between the parties as to the details of carrying out the contract, and 'so that the Bryant Company might be secured against any discrimination in favor of the Fourche Company in the transaction of its business, and the Fourche Company shall be required to carry timber and other freight equally without discrimination for or against the Bryant Company.'

The Fourche Company agreed that it would cause the contract to be ratified by the Fourche River Ry. & Indian Territory R. R. Company. Thereafter the contract was carried out; the Fourche R. R. was incorporated; the Bryant Company made to it a conveyance of the right of way, as stipulated; the railroad was constructed and hauled freight in intrastate and interstate commerce.

There was evidence that all of the stock of the railroad, except one or two qualifying shares, were held by the persons who owned the Fourche Lumber Company, but the two corporations kept separate books, and when the railroad made dividends, they were paid to its stockholders of record.

In August, 1907, differences arose between the parties, and under the provisions of the contract the Bryant Company demanded an arbitration of several matters in issue,-among others submitting to the board the following proposition:

    'Fourth. That the Fourche River Lumber Company, through the Fourche River Valley & Indian Territory Railroad Company, shall secure to the Bryant Lumber Company from the Fourche River Valley & Indian Territory Railroad Company, the same freight concessions as [230 U.S. 316, 320]   are now enjoyed by the Fourche River Lumber Company through its interest and the interest of its owners in the Fourche River Valley & Indian Territory Railroad Company.'

The arbitrators found in favor of the Bryant Company, and the terms of the award not having been complied with, the Bryant Company brought suit against the Fourche Lumber Company.

It appears that under the blanket rate, then of force, the same rate of freight was charged from any point in Arkansas to St. Louis, to Memphis, or to Oklahoma points. Out of this through rate the Rock Island allowed 2, 3, and 3 1/2 cents to the Fourche R. R. on all lumber originating on such road and shipped over the Rock Island to St. Louis, Memphis, or Oklahoma. This division of through rate between the two roads on interstate shipments was noted on the tariffs filed with the Interstate Commerce Commission.

On the trial, the president of the Bryant Company testified that it had shipped 13,251,759 pounds of lumber in interstate shipments, and on it the Bryant Company claimed 2 cents per 100.

Being asked what was the basis of the claim he said:

They are getting it.

Q. Who is getting it?

A. The Fourche River Vy. & Indian River R. R., which are the same people as the Fourche River Lumber Co.

Q. They are two separate and distinct corporations?

A. Yes.

In reference to the claim for failing to lay the tracks and switches as agreed, he was asked:

Did the Fourche R. R. furnish you with a profile?

A. I don't know that it was the railroad company, it was the lumber company, I think.

Q. Who did you get the profile from? The lumber company or the railroad company?

A. I don't know. To me they are all the same.

Q. I understand that; it is to your advantage to have them all the same; but as a matter of fact, from which institution did you get the profile?

A. I could look [230 U.S. 316, 321]   at the papers and see which one wrote the letter, but it is the same people all the time.

The defendant excepted to the refusal of the court to instruct the jury that 'a payment to the plaintiff of the differentials provided in the award of the arbitrators would be granting to the Bryant Company of a rebate forbidden by law, enabling the Bryant Company to transport its goods at less than the tariff rate, and you will find for the defendant on that issue.' Instead of giving the charge requested, the court instructed the jury that 'under the contract, and findings of the arbitrators, the Fourche Lumber Company was required to pay the Bryant Company the same differentials that the Fourche R. R. received on interstate shipments of the Fourche Lumber Company. If you find from the testimony that the Fourche R. R. has received certain differentials from the Rock Island on interstate shipments, and that the Fourche Lumber Company has not paid to the Bryant Lumber Company the same differentials on lumber that the Bryant Company has shipped to the same territory, then you are instructed that the defendant (Fourche Company) is indebted to the Bryant Company the amount of any such differentials which it has not paid.'

A judgment on the verdict rendered in accordance with this charge having been affirmed, the Fourche Lumber Company brought the case here, insisting that the charge and verdict were in violation of the interstate commerce act, and, in effect, amounted to the giving of a rebate to the Bryant Lumber Company. The latter replies that the suit is against the Fourche Lumber Company, and that there is no law preventing one company from paying the whole or any part of the freight due by another. That may be true, but not where that other party is sued as being in effect a common carrier, engaged in interstate commerce. The arbitration was demanded and the award made on the theory that, inasmuch as the contract provided that there should be no discrimination, the Bryant Company [230 U.S. 316, 322]   was entitled to receive from the Fourche Lumber Company 'the same freight concessions as are now enjoyed by the Fourche Lumber Company through its interest and the interest of its owners in the Fourche Railroad.' This suit is based upon the assumption that the two companies are identical in fact, though different in name.

Thus treating it, the case is as though the Bryant Lumber Company had sued the Fourche Lumber Company, doing business as an interstate carrier, for so much of the through rate as had been paid to it on the division by the Rock Island for hauling the Bryant Company's shipments of lumber. To state the proposition is to manifest its illegality, and to show that thereby the Bryant Company would get a reduction on the the Rock Island road, receives a part of the on the Fourche line.

The Fourche Railroad was not only incorporated as a common carrier, but is treated as such by the Interstate Commerce Commission; and, under the filed tariffs of the Rock Island road, receives a part of the through rate on all lumber originating upon the line and shipped in interstate commerce. The status of this road is discussed in Tap Line Case, 23 Inters. Com. Rep. 549, and its right to a division of the freight recognized notwithstanding the fact that the stockholders are the same as those who own the shares of the Fourche Lumber Company. But it receives this part of the through rate, not as a concession, but for services actually rendered by it as a common carrier in hauling freight for part of the distance between the point of origin and the point of destination. In any other view it would have been unlawful for the Rock Island to pay, and, if so, no agreement to divide such unlawful receipts would be enforced by the courts. On the other hand, if the Fourche Railroad was lawfully paid for services in hauling the lumber, it would be illegal, directly or through a subsidiary, to give to the shipper a part of such joint rate under any pretext whatever. Carriers, whether sawmill [230 U.S. 316, 323]   companies or railroads, or both combined, cannot purchase land by rebating to the grantor a part of the freight rate on interstate shipments over the road built on the right of way, even though the amount of such rebate was much less than the value of the land thus acquired. Cf. Louisville & N. R. Co. v. Mottley, 219 U.S. 467 , 55 L. ed. 297, 34 L.R.A.(N.S.) 671, 31 Sup. Ct. Rep. 265; United States v. Lehigh Valley R. Co. 220 U.S. 257 , 55 L. ed. 458, 31 Sup. Ct. Rep. 387; United States v. Union Stock Yards & T. Co. 226 U.S. 287, 308 , 57 S. L. ed. --, 33 Sup. Ct. Rep. 83.

The commerce act prohibits the payment of rebates, and its command cannot be evaded by calling them differentials or concessions, nor by taking the money from the railroad itself or from a company that is proved to be the same as the railroad. Otherwise nothing would be easier than for lumber companies to charter a railroad, collect freight as a railroad, but pay it out as a lumber company to shippers.

The suit in the present case proceeds on the theory that the Fourche Lumber Company and the Fourche Railroad are the same, and that therefore the division of the through rate allowed to the railroad was in fact received and enjoyed by the lumber company. And yet, notwithstanding that fact, it is claimed that if the Fourche Lumber Company should, under the contract, pay a part of that freight to the Bryant Company, it would do so as a sawmill, and not as a carrier. The law will not permit such a chameleon-like change. The Fourche Lumber Company and the Fourche Railroad are either the same or different. If they are the same, it cannot refund a part of the rate to the Bryant Company. If they are different, the Fourche Lumber Company was not bound by the terms of the contract to make the payment now demanded. The court below found that they were the same, and not different, and it results that its judgment must be reversed.

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Citation: 230 U.S. 316

Docket No: No. 296

Argued: May 06, 1913

Decided: May 06, 1913

Court: United States Supreme Court

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