Union Pacific Railway Company v. Goodridge/Opinion of the Court

This case involves the construction of an act of the legislature of Colorado passed in 1885, prohibiting railroads from charging one person or corporation a greater sum than it charges any other for a like service, upon like conditions, and under similar circumstances. The statute is of the same nature as the interstate commerce act, and, like that, was designed to prevent unjust discrimination and extortion in rates for the carriage of persons and property.

1. The first assignment of error is taken to the ruling of the court sustaining the demurrer to the second answer of the defendant, in which it set up certain contracts with the Marshall Consolidated Coal Company, which were claimed to justify the rebate of 40 cents per ton allowed to that company from the regular schedule rates, which the plaintiffs were compelled to pay. This defense set forth a very complicated series of facts, which, however, are susceptible of a condensed statement. It seems that the defendant, the Union Pacific, was the owner of a large part of the capital stock of the Union Coal Company, and had been for some time receiving from it coal for consumption upon its locomotives, when, on account of certain complaints made by the owners of other mines, it concluded that it was for its best interests to discontinue its connection with this company, and to enter into negotiations with the Marshall Company for its supply of coal. These negotiations resulted in the contract of October 13, 1885, wherein the coal company agreed, on its part-First, to furnish the railroad with all coal needed for its consumption, not exceeding 50,000 tons the first year, and 100,000 tons yearly thereafter, and to deliver the same on its cars at the mouth of the mine at cost, but in no case to exceed $1.25 per ton; second, that in case the railroad should order in excess of the above amount the same should be furnished at cost, plus 50 cents per ton, but in no case should such cost exceed $1.40 per ton; third, that the railroad company should have the option for two years of taking a majority of the capital stock of the coal company, in preference to any other purchaser, should the coal company desire to sell the same.

The railway company, upon its part, agreed to go out of the business of mining coal, and to give the coal company the regular tariff rate to Denver of $1 per ton, unless 200,000 tons were furnished for transportation each year, in which case a rebate of 40 cents should be given, with a corresponding reduction in case the regular tariff was reduced below $1.

There were other subordinate covenants upon both sides, but they are not material to the consideration of this case. This contract was to remain in force for five years.

It is a sufficient reply to the whole defense set up in this part of the answer to say that the coal company was only to be allowed a rebate of 40 cents per ton in case it furnished the railroad company 200,000 tons per year for transportation, and there is no allegation in the answer that it ever did furnish this amount, or ever became entitled to the rebate. The want of such allegation is fatal to the contract as a defense, and the court, for this reason, if for no other, was right in sustaining the demurrer.

But we think the answer must be held insufficient for another reason. It is further stated that an additional consideration existed for this rebate in certain unliquidated claims for damages which the former owners of the Marshall mines had against the Denver, Western & Pacific Railway Company, the original constructors of the road, by reason of their negligently breaking into the mine during the construction of the road, setting it on fire, and thereby consuming a large amount of coal and personal property, for which claim suits were instituted against the railway company, and litigated at great expense for several years, and were still undetermined. There was also another claim for a right of way for one mile across their lands. These claims, Langford and others, who then owned the mine, sold and assigned to the Marshall Company with the property. The Denver, Western & Pacific Railway, which had done the injury for which the damages were claimed, was itself sold under foreclosure of its mortgage, and bought in by parties acting in the interest of the Union Pacific, who organized a new corporation, called the Denver, Marshall & Boulder Railway, leaving the claim of the Marshall Coal Company unadjusted and unpaid, and a lien upon the property. How this claim for unliquidated damages for the negligence of the railroad company became a lien upon the property of the company, and how such lien took precedence of the mortgage, and survived the foreclosure and sale of the property, and became a lien upon the road in the hands of the Denver, Marshall & Boulder Company, does not clearly appear; but admitting it to be still valid and outstanding, as alleged in the answer, the question still remains whether the defendant company can set up an unliquidated claim of this kind in defense of a rebate of 40 cents per ton allowed the coal company over every other shipper on its road.

It will be observed, in this connection, that not only was the amount of the damages suffered by the coal company never fixed, agreed upon, or adjusted, but the amount of coal which the Marshall Company was at liberty to deliver to the railroad company for transportation was left equally indefinite, save only that it must exceed 200,000 tons per year to entitle it to the rebate. This contract was to remain in force five years; but, upon the theory of the defendant, there was nothing to prevent it being continued indefinitely, provided the defendant company was willing to accede to any amount of damages which the coal company might see fit to claim. While we do not undertake to say that a railroad company may not justify a fixed rebate in favor of a particular shipper by showing a liquidated indebtedness to such shipper, which the allowance of the rebate was intended to settle, it would practically emasculate the law of its most healthful feature to permit an unexplained, indefinite, and unadjusted claim for damages arising from a tort, which, though litigated for some time, never seems to have been prosecuted to a final determination in the courts, to be put forward as an excuse for a clear discrimination in rates. This act was intended to apply to intrastate traffic the same wholesome rules and regulations which congress two years thereafter applied to commerce between the states, and 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, saving only a power, not in the railroad company itself, but in the railroad commissioner, to except 'special cases, designed to promote the development of the resources of this state,' and not to prevent the railroad company 'from making a lower rate per ton per mile, in car-load lots, than shall govern shipments in less quantities than car-load lots, and from making lower rates for lots of less than five car loads than for single car-load lots.' The statute recognizes the fact that it is no proper business of a common carrier to foster particular enterprises, or to build up new industries; but, deriving its franchise from the legislature, and depending upon the will of the people for its very existence, it is bound to deal fairly with the public, to extend them reasonable facilities for the transportation of their persons and property, and to put all its patrons upon an absolute equality. Scofield v. Railway Co., 43 Ohio St. 571, 3 N. E. Rep. 907; Sandford v. Railroad Co., 24 Pa. St. 378; Messenger v. Railroad Co., 36 N. J. Law, 407; McDuffie v. Railroad Co., 52 N. H. 430. So opposed is the policy of the act to secret rebates of this description that it requires a printed copy of the classification and schedule of rates to be posted conspicuously in each passenger station for the use of the patrons of the road, that every one may be appraised, not only of what the company will exact of him for a particular service, but what it exacts of every one else for the same service, so that in fixing his own prices, he may know precisely with what he has to compete. To hold a defense thus pleaded to be valid would open the door to the grossest frauds upon the law, and practically enable the railroad company to avail itself of any consideration for a rebate which it considers sufficient, and to agree with the favored customer upon some fabricated claim for damages, which it would be difficult, if not impossible, to disprove. For instance, under the defense made by this company, there is nothing to prevent a customer of the road, who has received a personal injury, from making a claim against the road for any amount he chooses, and in consideration thereof, and of shipping all his goods by that road, receiving a rebate for all goods he may ship over the road for an indefinite time in the future. It is almost needless to say that such a contract could not be supported.

There is no doubt of the general proposition that the release of an unliquidated claim for damages is a good consideration for a promise, as between the parties, and if no one else were interested in the transaction that rule might apply here; but the legislature, upon grounds of public policy, and for the protection of third parties, has made certain requirements with regard to equality of rates, which in their practical application would be rendered nugatory if this rule were given full effect. For this reason we think the railroad company is in error in its assumption that 'if, in the honest judgment of the officers of the defendant company who made the contract, the considerations which entered into it, and upon which alone it was made, were sufficient to warrant the company to pay back to the Marshall Company forty cents per ton for each ton it shipped for five years, that is enough.' This is but a restatement, in different language, of a comment made by the court below in its opinion, that 'the whole answer amounts only to this: that the Marshall Company is allowed less rates than other shippers are required to pay, upon considerations which are satisfactory to defendant; and it is obvious that this is no answer to a complaint of unlawful discrimination.' If reasons of public policy dictate that the schedule rates shall be posted conspicuously in each railway station, it is no less important that the customers of the road should have the means of ascertaining whether any departure from such rates in favor of a particular shipper is justified by the facts. Such a method is contemplated by the act, in providing that no discrimination of this kind shall be made without the written approval of the railway commissioner. It was evidently designed to put it in the power of the commissioner to permit such discrimination to be made, possibly in a case like the present one, if, in his opinion, the circumstances seem to warrant it.

2. The second assignment of error is taken to the admission of certain letters of Taggart and Kimball.

Upon the trial of the case before a jury the plaintiffs gave evidence tending to show that the Jackson Coal Company was operating mines at Canfield, 36 miles from Denver, and was charged by defendant one dollar per ton for transportation, and that another railroad company, which ran across the mine, charged the same rate. There was also testimony showing the amount shipped by plaintiffs over defendant's road to have been 12,961 tons, for which they paid one dollar per ton. Plaintiffs thereupon called E. R. Taggart, who resided in Denver, and had been engaged in the coal trade for several years selling the product of the Fox Coal Company, which shipped its coal at the same station as the Marshall Company, and was charged one dollar, and who testified that upon information received by him of the rebate allowed to the Marshall Company, through the proceedings of a commission appointed to investigage the affair, he wrote to the president of the defendant, and also to T. L. Kimball, the general traffic manager and official head of the defendant company. The letter to Kimball, with the reply, was objected to upon the ground that, the demurrer to the second answer having been sustained, any statement of the way in which the defendant acted relating to that defense was immaterial, irrelevant, and incompetent, which objection was overruled, and defendant excepted. The letter from Kimball to the witness Taggart purported to be a reply to a letter from Taggart to the president of the road, and stated generally that the contract with the Marshall Company was made under circumstances entirely dissimilar to those existing between the Fox Company and the Union Pacific, and in consideration of the company's furnishing the railroad coal for its own use at not exceeding $1.25 per ton, and also in compromise and settlement of a claim against the company for some sixty-odd thousand dollars. Taggart's reply thereto, dated August 20, 1887, stated the claim from his standpoint, and that he had been advised by the very highest legal sources that the contract was without warrant, and clearly in violation of law, and further insisted upon his claim for the repayment of 40 cents per ton. If there were any objection to the admission of Kimball's letter upon the ground that the letter to which it was a reply was not produced, that objection was met by the production of that letter upon cross-examination,-a letter which appears to have been written July 25, 1887, to Mr. Adams, president of the road, at Boston. The witness stood in the same position as the plaintiffs with respect to defendant, and had also brought suit against it to recover the same rebate which had been allowed to the Marshall Company, and which plaintiffs were suing to recover in this case. Assuming the correspondence to have been between different parties, and therefore irrelevant, it is not easy to perceive how it could have prejudiced the defendant, as Kimball's letter was a mere iteration of the defense set up in the answer, and put forward at the trial, and Taggart's reply thereto, if irrelevant, was not improper, or prejudicial to the defendant. If the witness had had an oral conversation with Mr. Kimball, the manager of the defendant company, there can be no doubt that such conversation, and the whole of it, would have been admissible, as both Taggart's claim and defendant's stood precisely upon the same footing, and if this demand and refusal, instead of being oral, was by correspondence, it would seem to be equally admissible. As Kimball's letter stated clearly the position of the defendant with regard to both these claims, it is difficult to see how it could be prejudiced by its production.

3. The 3d, 4th, and 5th assignments of error are taken upon the same ground to the action of the court in refusing to allow the witnesses Taggart and Rubridge to testify as to what it cost to get out coal, and put it on the cars at the Marshall mine, and in ruling out testimony showing that by reason of such cost the Marshall Company actually paid at least $1 per ton for coal carried by defendant.

At the time witness Taggart was asked this question, the case stood in this position: A demurrer to the second answer of the defendant, setting up its excuses for the rebate, had been sustained, and the case set for trial upon the complaint and the denials,-in other words, upon the general issue. Plaintiffs had shown that they, as well as the Jackson & Fox Coal Company, had paid $1 per ton, and had shown the rebate paid to the Marshall Company, but the contract had not been put in evidence, though the witness Taggart had sworn that he knew 'that defendant set up in bar of plaintiffs' claim a contract they had with the Marshall Company in consideration of the Marshall Company supplying them with coal at a given price,-much below the price at which they could mine it, or get it out of the mines,-and, further, in settlement of an old lawsuit they had;' and the record then states, in a very blind way, that 'the witness gave further testimony showing that Kimball's testimony as to its own uses, and not exceeding $1.25 per ton, which was then costing plaintiffs and others about $1.50 to mine, and commercial coal at not exceeding $1.40 per ton, at a time when other producers asked $1.60 per ton, that was making a difference of from 20 to 25 cents per ton on every ton of coal than what it cost.' Defendant's counsel here asked: 'As a matter of fact, do you know what it did cost to get out a ton of coal, and put it on cars at the Marshall or Fox mine?' This was clearly immaterial, as it was no excuse for a rebate that the coal cost more or less. The right of a railroad to charge a certain sum for freight does not depend at all upon the fact whether its customers are making or losing by their business.

The next witness, Robert H. Rubridge, who had been the treasurer and assistant secretary of the Marshall Company, testified that from November 1, 1885, to August 1, 1887, there was shipped from the Marshall mine to Denver 67,863 tons, upon which a rebate of 40 cents per ton was allowed. Upon cross-examination he testified that that rebate was allowed in consideration 'of our giving an indemnity bond. Our company gave an indemnity bond protecting the Union Pacific from all claims on account of a damage suit against them, amounting to about $65,000, for which they had attachments on some of the rolling stock and ties and half a mile of track of the Denver, Western & Pacific. * *  * We were to give them coal at cost for the company's use, but not to exceed at any time $1.25 per ton, and also to give them coal for commercial use at not exceeding $1.40 per ton; that is, for Kansas, but not for Denver.' This oral testimony with regard to the contract was objected to by plaintiffs' counsel on the ground that the written contract should be produced,-an objection which was overruled by the court. There was evidently an attempt here to obtain from the witness a statement of so much of the contract as was favorable to the defendant, and at the same time not to put it in evidence, since the contract would show on its face that the coal company was not entitled to any rebate, unless it furnished the railroad company 200,000 tons per annum for transportation,-a far larger amount than it did actually furnish. It further appeared that the contract establishing the price of coal was not lived up to, as the railroad company was paying anywhere from $1.25 to $1.75 per ton. The witness was then asked how much it cost to get out coal, and to put it on the cars for the use of the Union Pacific in its engines, and also for its commercial use in Kansas.

The answer to this question, as well as the proposal of the defendant to show by the witness that the cost of getting out the coal, which they were obliged to furnish the Union Pacific under the contract, was largely in excess of what they got, was properly ruled out. The relations between the defendant and the Marshall Company were fixed by their written contract, and under that contract the railway company was entitled to a certain amount of coal at $1.25 per ton, regardless of cost, and the Marshall Company was not entitled to a rebate unless they furnished 200,000 tons per annum for shipment. This testimony could only have been offered to show that the company was losing money in furnishing the coal at $1.25 per ton, and therefore that the discrimination in their favor by the railroad company was not unjust. But the court, having sustained the demurrer to the answer setting up this contract upon the ground that it constituted no defense, could not consistently have permitted the defendant to introduce oral testimony of such contract for the purpose of enabling it to rely upon such stipulations as were thought to be favorable to itself. The witness had stated, in answer to the question why the rebate of 40 cents per ton was allowed, that the consideration for doing this was in writing. Plaintiffs' counsel thereupon objected to the proposed oral evidence of the contract as incompetent; and while this objection, though it seems to us to have been well taken, was not sustained, and the witness was permitted to give certain of its stipulations, the court was at liberty at any time to put a stop to this character of testimony, or to rule out any further questions based upon it. The whole case virtually turned upon the demurrer to that portion of the answer setting up this contract. This demurrer having been sustained, the defendant should not have been allowed, in this indirect way, to obtain the advantage of certain stipulations included in the contract.

4. The sixth assignment, that the court erred in refusing to receive in evidence the release of the Marshall Company to the defendant company, cannot be sustained, for the same reason. This release, a copy of which is given in the record, was given by the Marshall Coal-Mining Company, and by Langford and Marshall, the previous owners of the mine, to the defendant railway company, releasing it from 'all actions and causes of action, suits, controversies, claims, and demands whatsoever for or by reason of any cause, matter, or thing arising out of the construction of any railroad across the property of either of us in Boulder and Jefferson counties, Colorado.' It is obvious, upon the principles hereinbefore stated, that this release was altogether too vague and general to serve as a basis for making the rebate to the Marshall Company.

After some other testimony as to prices paid by other companies, and of unsuccessful efforts made to ascertain why the Marshall Company was given lower rates than its competitors, the plaintiffs rested. The defendant put in no testimony, and the case was committed to the jury, who returned a verdict for $5,481.34.

5. The seventh and last assignment of error was to the action of the court in refusing to grant a new trial, and in entering a judgment on the verdict, because there was no sufficient evidence to support the verdict, and especially to sustain it as to the amount of damages. Plaintiffs' evidence had shown that the Marshall Company had been receiving a rebate upon all coal transported by it to Denver, which was not allowed to its competitors in business, and the damages sustained by the plaintiffs were measured by the amount of such rebate, which should have been allowed to them. The question whether they lost profits upon the sale of their coal by reason of the nonallowance of such rebates was too remote to be made an element of their damages. They were entitled to the same terms which the Marshall Company would have received, and damages to the exact extent to which the Marshall Company was given a preference.

There was no error in the action of the court below, and its judgment is therefore affirmed.