Supreme Court of United States.
Mr. W.E. Hemingway and Mr. E.B. Kinsworthy for plaintiff in error.
Mr. R.E. Wiley, and Mr. Powell Clayton for defendant in error.
*358 MR. JUSTICE VAN DEVANTER delivered the opinion of the court.
A statute of the State of Arkansas (Laws of 1907, Act 61), relating to the liability of carriers by railroad for live stock killed, wounded or injured by their trains, contains this provision:
"And said railroad shall pay the owner of such stock within thirty days after notice is served on such railroad by such owner. Failure to do so shall entitle said owner to double the amount of damages awarded him by any jury trying such cause, and a reasonable attorney's fee. And provided further, that if the owner of such stock killed or wounded shall bring suit against such railroad after the thirty days have expired, and the jury trying such cause shall give such owner a less amount of damage than he sues for, then such owner shall recover only the amount given him by said jury and not be entitled to recover any attorney's fees."
*359 The owner of two horses, which were killed within the State by a train of a railway company, served upon the company a written notice demanding damages in the sum of $500. The company refused to pay the demand, and after the expiration of thirty days the owner brought suit in a court of the State to recover his damages, alleged in the complaint to be $400. A trial to a jury resulted in a verdict for the owner, assessing his damages at the amount sued for, and the court, deeming the statute applicable, gave judgment for double that amount and for an attorney's fee of $50. The company objected that the statute, as thus applied was repugnant to the due process of law clause of the Fourteenth Amendment to the Constitution of the United States, but the objection was overruled, and on appeal to the Supreme Court of the State the judgment was affirmed. 90 Arkansas, 538. The case is here on a writ of error to that court.
It will be perceived that, while before the suit the owner demanded $500 as damages, which the company refused to pay, he did not in his suit either claim or establish that he was entitled to that amount. On the contrary, by the allegations in his complaint he confessed, and by the verdict of the jury it was found, that his damages were but $400. Evidently, therefore, the prior demand was excessive and the company rightfully refused to pay it. And yet, the statute was construed as penalizing that refusal and requiring a judgment for double damages and an attorney's fee. In other words, the application made of the statute was such that the company was subjected to this extraordinary liability for refusing to pay the excessive demand made before the suit.
We think the conclusion is unavoidable that the statute, as so construed and applied, is an arbitrary exercise of the powers of government and violative of the fundamental rights embraced within the conception of due process of law. It does not merely provide a reasonable *360 incentive for the prompt settlement, without suit, of just demands of a class admitting of special treatment by the legislature, as was the case with the statute considered in Seaboard Air Line Railway Co. v. Seegers, 207 U.S. 73, but attaches onerous penalties to the non-payment of extravagant demands, thereby making submission to them the preferable alternative. Thus, it takes property from one and gives it to another, not because of a breach by the former of a duty to the latter or to the public, but because of a lawful exercise of an undoubted right. Plainly this cannot be done consistently with due process of law. And, in principle, the Supreme Court of the State has so held since its decision in this case. In Pacific Mutual Life Insurance Co. v. Carter, 92 Arkansas, 378, that court had occasion to consider a statute of the State providing that if a loss under a policy of insurance was not paid within the time specified, "after demand made therefor," the company should be liable, in addition to the amount of the loss, to twelve per cent damages and a reasonable attorney's fee. An insured demanded in payment of a loss under such a policy the sum of $1,666.66, which the insurance company refused to pay, and in a suit on the policy, wherein it was found that the loss was but $1,444.44, the insured was awarded the statutory damages and an attorney's fee. That part of the judgment was reversed, and it was said (p. 387):
"But the act makes the company liable for failure to pay the loss `after demand made therefor.' The statute thus contemplates that there shall be a demand. A recovery for penalty and attorney's fee cannot be had when complainant makes demand for more than he is entitled to recover. It could never have been the purpose of the Legislature to make the insurance companies pay a penalty and attorney's fee for contesting a claim that they did not owe. Such an act would be unconstitutional. The companies have the right to resist the payment of a *361 demand that they do not owe. When the plaintiff demands an excessive amount, he is in the wrong. The penalty and attorney's fee is for the benefit of the one who is only seeking to recover after demand what is due him under the terms of his contract, and who is compelled to resort to the courts to obtain it."
In the brief for the railway company the contention is advanced that the statute would still be wanting in due process of law were it construed as imposing double liability, with an attorney's fee, only where the prior demand is fully established in the suit following the refusal to pay; but that question does not necessarily arise upon the facts of this case, and we purposely refrain from considering it.
Confining ourselves to what is necessary for the decision of the case in hand, we hold that the statute, as construed and applied by the state courts, is wanting in due process of law and repugnant to the Fourteenth Amendment of the Constitution of the United States.
The judgment is accordingly reversed, and the case is remanded for further proceedings not inconsistent with this opinion.
Reversed.
