W. M. Carter Planing Mill Co. v. New Orleans M. & C. R.

Holden, J.,

delivered the opinion of the court.

This is an appeal from the chancery court of Jones county, where the appellant W. M. Carter Planing Mil] Company filed its bill, claiming fifty thousand dollars as damages for the breach of a contract covering switching or stoppage charges on cars consigned to its mill at Laurel. A demurrer to the bill filed by the defendant New Orleans, etc., R. Co. was sustained by the lower court, and the complainant appeals here.

The appellant alleged in its bill: That on January 18, 1907, it entered into a contract with the appellee through the Mobile, Jackson & Kansas City Railroad Company which company was succeeded by the appellee, covering a dressing or planing of lumber in transit arrangement at Laurel. This contract, among other things, provided:

“That in all cases when the shipper may so direct, said direction to be inserted in the bill of lading covering shipment, the railroad company will deliver to the planing mill company, at its planing mill at said Laurel, all undressed lumber received by it for transportation over its said railroad to Laurel, and points Beyond reached by its own rails, or the rails of its connection, to be planed or. dressed at said mill and returned to the railroad company for further transportation: . . . Provided, however, that the rates her-inabove provided for shall be subject to such change at all times as may be requried by the law, or the order of- the railroad commissions, to the jurisdiction of which the railroad company is subject, either state or Federal, ’ ’ etc.

That on or about January 8, 1910, the appellee railroad company failed and refused to carry out said contract. That one of the most important terms in said contract, and upon which it relied and rested, was the stipulation that the defendant would grant freight rates from' points of origin to destination, and would only make a charge of five dollars per car for switching cars to complainant’s plant, thus enabling complainant to compete with other such plants .on the line of the railroad-where the switching charge was from ten to fifteen dollars per car. That complainant was doing a large and profitable business by reason of the rate, of five dollars per car for switching, and that its profit on each car by reason of such stipulated rate was from five to ten dollars, and that its business was largely increased over its competitors on other roads who were required to pay the larger shipping charge. That the denial of such rate to the complainant ruined and destroyed its then profitable and flourishing business. That complainant was doing a prosperous business, and its monthly profits were ten thousand dollars and that by reason of the advantage it had in the switching rate, its business would have steadily increased. The defendant railroad company demurred to the bill; and while the demurrer appears to be very lengthy, it really contains only one distinct ground, and that is, that the bill, on its face, seeks • to enforce an illegal contract.

To state the case more briefly: The milling company had a written contract with the railroad company, providing that if the milling company would locate its plant on the' railway line of appellee, and give its lumber hauling business to appellee, the appellee would furnish ears and shipping facilities to appellant at a certain rate of five dollars per car. This arrangement was entered into and carried out by the parties until other planing mills were located along tlie railway of appellee, and after the enactment of the Federal Interstate Commerce Act, forbidding discrimination in freight rates, and providing a severe-penalty npon the shipper and the carrier for the violation thereof. These lumber shipments in question in this case were interstate shipments and, of course, are governed by the laws enacted by Congress. When the Federal Interstate Commerce Act, forbidding discriminations in freight rates, became effective, ■ as to the parties here, the appellee railroad company refused to further furnish appellant cars at the said five dollars rate agreed upon in the contract, for the reason that other shippers on the appellee’s railroad line were charged a higher rate for the same service, and that to comply with the contract made with the appellant, in giving appellant the lesser rate agreed upon in the contract, would be a discrimination which is forbidden and made unlawful by the Federal act. But the appellant contends that, even though to carry out the contract between appellant and appellee would he a discrimination in freight rates, and unlawful, under the act of Congress, yet the appellant should he allowed to recover because the contract between appellant and appellee was legal and valid at the time it was entered into, as there was no discrimination at that time, and that it cannot be made illegal or invalid by subsequent conditions or legislation. That to deny to appellant the right to the discrimination in the freight rate under its contract with appellee would be. “impairing the obligation of contracts” in violation of the Constitution. In - other words, the appellant admits receiving a discriminating freight rate in violation of the Federal law, but contends that it should be allowed to continue to enjoy this special rate in violation of law because it had contracted for such rate before the law against discrimination became effective as to appellant. We cannot agree -with the contention of the appellant. The contract .entered into provides:

“That the rates hereinabove provided for shall be subject to snch change at all times as may be required by the law, or the order of the railroad commissions, to the jurisdiction of which the railroad company is subject, either state or Federal.”

"When the freight rate was fixed by the Eailroad Commission for interstate traffic, it appeared that the rate charged to other shippers was greater than that named in the contract between appellant and appellee,, and we think, under the terms of the contract, the ap-pellee railroad could properly refuse to follow the old rate given appellant under the contract and adopt the-general freight rate fixed by law. But regardless of ‘this latter provision of the contract, the law is well settled by both Federal and state courts that contracts, for interstate transportation at special rates, although entered into before the enactment of a law forbidding discrimination in freight rates, becomes void upon the-enactment of the- statute. In Armour Packing Co. v. United States, 200 U. S. 56, 28 Sup. Ct. 428, 52 L. Ed. 681, the United States supreme court said:

“There is no provision excepting special contracts, from the operation of the law. Cne rate is to be charged, .and that the one fixed and published in the manner pointed out in the statute, and subject to-change in the only way open by the statute. There is no provision for the filing of contracts with shippers, and no method of making them public defined in the-statute. If the rates are subject to secret alteration by special agreement, then the statute will fail of its purpose to establish a rate duly published, known to all,, and from which neither shipper nor carrier may depart.. It is said that if the carrier saw fit to change the published rate by contract, the effect will be to make the-rate available to all other shippers. But the law is not limited to giving equal rates by indirect and uncertain methods. It has provided for the establishing of one rate, to be filed as provided, subject to change as provided, and that rate to be, while in force, the only legal rate. Any other construction of the statute opens the door to the possibility of the very abuses of unequal rates which it was the design of the statute to prohibit and punish.”

The note writer, in commenting on the Armour Case, supra, in 14 L. R. A. (N. S.) 400, says:

“The United States supreme court, in affirming the above decision . . . has settled the law to be that a contract for a freight rate less than the rate after-wards established by the carrier in accordance with the provisions of the Interstate Commerce Act cannot be upheld upon the' ground that, at the time the contract was entered into, the rate therein provided for was the legally established rate.”

We find the same rule announced in Michigan Upper Peninsular Pig Iron Rates Matter, 26 Interst. Com. Com’n R. 284.

, The act of Congress here in question was effective in February, 1903 (Act Feb. 19, 1903, ch. 708, 32 Stat. 847 [U. S. Comp. St. 1913, secs. 8597-8599]). At the time the contract was made between the parties in this case, 1907, it was the law, and should be read into it as if written therein. The law supersedes the contract, in so far as granting a discriminating freight rate, and renders it null and void.

While the Federal Constitution, article 1, sec. 10, prohibits any state from passing a law impairing the obligation of contracts, this inhibition does not apply to the acts of Congress in dealing with interstate matters. As to whether or not a state legislature could effectively impair the obligation of contracts by the enactment of a subsequent statute in a case of this kind, where the subject dealt with is affected with a public use and might come within the police power of the state, we do not express an opinion, but we do hold here, following what seems to be the well-settled law on the subject in both state and Federal courts, that the appellant has no right to recover under the facts, of this case, because his contract is illegal and void.

Affirmed.