In a proceeding before the Interstate Commerce Commission to
establish through route and joint rates over the Manufacturers
Railway, a company operating terminals at St. Louis and held by the
Commission to be a common carrier, though controlled and
principally used by the intervening Brewery, and certain trunk
lines at St. Louis, the contention was that the latter, in
cancelling tariffs wherein they had applied their St. Louis rates
to industries on the Railway and had absorbed its switching
charges, and in continuing this practice as to another terminal --
St. Louis Terminal Railroad Association -- whose shares they owned,
were guilty of unlawful discrimination, in avoidance of which the
absorption should be reestablished.
Held:
(1) That the finding of the Commission, based upon difference of
location, ownership, and operation, that there was not undue
discrimination was not without evidentiary support, and not an
abuse of discretion.
(2) That the Commission was justified by the evidence in holding
that not more than $2.50 per car should be added to the trunk line
rates for the Railway terminal, upon the ground that such
limitation was necessary to avoid undue preferences or indirect
rebates to the Brewery.
(3) That, as the controversy was not directed to the
reasonableness of the trunk line rates, the Commission, in fixing
the maximum joint
Page 246 U. S. 458
rate, properly assumed them to be reasonable
per se,
the "increased rate clause" of the Commerce Act, as amended (c.
309, 36 Stat. 552), does not lay upon the carrier the burden of
proving a new rate reasonable when that question is not involved in
the hearing.
(4) That the decision of this Court respecting the St. Louis
Terminal Association (
224 U. S. 224 U.S.
383,
224 U. S. 412;
236 U. S. 236 U.S.
194,
236 U. S.
207-209), left untouched the powers of the Commission,
and complainants were entitled, at most, to have the Commission
consider the nature and objects of the Association as circumstances
bearing upon the question of discrimination and questions pertinent
thereto.
In fixing joint rates, it is within the discretion of the
Commission to allow the carriers to arrange the divisions, as
contemplated by the first paragraph of § 15 of the Commerce
Act (36 Stat. 551), subject to review by the Commission.
Whether a discrimination is undue or unreasonable or unjust is a
question of fact confided by the Commerce Act, as amended
(§§ 15, 16), to the judgment and discretion of the
Commission, and upon which its decisions, made the basis of
administrative orders operating
in futuro, are not to be
disturbed by the courts except upon a showing that they are
unsupported by evidence, were made without a hearing, exceed
constitutional limits, or for some other reason amount to an abuse
of power.
A court cannot substitute its judgment for that of the
Commission upon a purely administrative matter.
Common use of the facilities of the St. Louis Terminal by
fourteen trunk lines owning its capital stock, under a single
arrangement by which they absorbed the terminal charges,
held not as a matter of law to entitle another terminal
company, having no trunk line and doing terminal switching alone,
to precisely the same treatment.
The district court has no jurisdiction under the Commerce Acts
to exercise administrative authority where the Commission has
failed or refused to exercise it, or to annul orders of the
Commission not amounting to an affirmative exercise of its powers.
So
held where the Commission fixed maximum joint rates for
trunk lines and a terminal company, and the gravamen of the
latter's suit was the failure to fix the divisions.
A proper foundation for reparation was not laid in the evidence
submitted to the Commission in this case.
Pending a proceeding before the Commission involving an inquiry
as to how much could properly be allowed to a terminal as divisions
or absorptions by trunk line carriers, one of the latter, which
was
Page 246 U. S. 459
and remained a party, filed and published a tariff providing for
absorptions of the terminal's switching charges up to a certain
rate per car which it had previously allowed and retracted and was
in the position of attacking in the proceeding as illegal and
excessive. The Commission suspended the proposed absorption for 120
days from the effective date, and then for 6 months, to await its
decision in the pending inquiry, treating the one as ancillary to
the other and as involving no different question on the merits,
and, upon deciding the original matter within the 6 months,
cancelled the tariff without having given it a separate hearing.
Held proper, and not inconsistent with the provisions of
§ 15, second paragraph, of the Commerce Act, as amended June
18, 1910, c. 309, 36 Stat. 552, respecting suspensions of new
rates.
Although a rate-fixing order is not conclusive against attack
upon the constitutional ground of confiscation, correct practice
requires that the objection be made, and all evidence pertinent
thereto adduced, before the Commission in the first instance, if
practicable.
Where the Commission, after full hearing, sets aside a rate as
unreasonably high, only a clear case would justify a court, upon
evidence newly adduced but not newly discovered, in annulling the
Commission's action upon the ground that the same rate was so
unreasonably low as to deprive the carrier of its constitutional
right of compensation.
The evidence produced and relied on in the district court by the
complaining terminal, consisting of expert valuation of its
leasehold and other property, calculations of revenue and expenses,
with allocations to its interstate business, examined and
held largely speculative, inconsistent with other
evidence, in part based on erroneous theories, and, as a whole,
insufficient to establish that a rate of $4.50 per car for
interchange movements would be confiscatory.
The voluntary adoption of a rate by a carrier is some evidence
against the carrier that it is remunerative.
In estimating the value of a leasehold to the lessee, taxes paid
by the lessor should not be deducted from the annual cost as
measured by the gross rental.
A finding by the Commission that a railway is a common carrier
does not mean that all of its property must be treated as employed
in the public service; portions used as a private plant facility
should not be considered in determining the adequacy of a rate.
A city leased for railway purposes land, which in considerable
part constituted a public wharf.
Held that, if the rental
was less than
Page 246 U. S. 460
the fair annual value, it must be presumed the excess was
granted to the public, and not to the private interest of the
carrier, in capitalizing it acts for the purpose of testing the
adequacy of a rate.
In testing the adequacy of an interstate rate, it is error to
base the computation on the receipts and expenses of the carrier's
entire business without considering the adequacy of its charge for
services not affected by the rate or their possibly private
character.
Affirmed.
These are appeals from final decrees made by the district court
in two cases dismissing petitions filed by the appellants for the
purpose of enjoining the enforcement of orders made by the
Interstate Commerce Commission. The cases are closely related to
each other, were argued at the same time, and will be disposed of
in a single opinion.
The facts are intricate, and have been the subject of
consideration by the Commission in three reports (21 I.C.C. 304; 28
I.C.C. 93; 32 I.C.C. 100), from which the following resume is
taken:
Situate in South St. Louis, within the limits of the City of St.
Louis, Missouri, and on the high ground back from the Mississippi
River, are the great industrial plants of the Anheuser-Busch
Brewing Association, a corporation, hereinafter called the Brewery,
which occupy approximately 126 acres -- 35 or 40 city blocks --
intersected by streets. There are numerous structures in which are
conducted the manufacture and marketing of beer and related
products. The tonnage shipped by and to the Brewery is very heavy,
amounting to upwards of 40,000 carloads per annum, or approximately
one-thirtieth of all the inbound and outbound traffic of the entire
city. For a number of years following the establishment of the
Brewery, its inbound raw materials and outbound products were drawn
by horse and wagon from and to the tracks of the St. Louis, Iron
Mountain & Southern Railway Company, hereinafter called the
Iron Mountain,
Page 246 U. S. 461
on the river front. In the year 1885, this method was abandoned,
and a plant railway operated by steam was substituted. Two years
later, the plaintiff Manufacturers' Railway Company was
incorporated, hereinafter referred to as the Railway, to which
control and operation of the plant system was made over. The
Railway now has a main line of 2 1/4 miles, and approximately 23
miles of side tracks. It is engaged exclusively in the switching
and delivery of carload freight within the City of St. Louis. The
traffic of the Brewery constitutes about 75 percent of this total
tonnage. At the time of the hearing before the Commission, it owned
no cars, and only four locomotives, the cars used for the
transportation of shipments originating on its line being furnished
principally by the St. Louis Refrigerator Car Company, a
substantial portion of whose stock is owned by the holders of a
majority of the stock of the Brewery. The facilities of the
Railway, however, for a considerable period and to a large extent
had been available to the public, and it was held by the Commission
to be a common carrier, and not a mere industrial or tap line. But
a majority of the stock of the Railway was and is owned by the
owners of a majority of the stock of the Brewery, so that the same
interest controls both properties.
In the year 1888, the Railway leased its tracks to the Iron
Mountain for ten years, and in 1898 renewed the lease for ten
years. Up to this time, the only outlet from the rails of the
Railway was to the main line of the Iron Mountain on the bank of
the Mississippi River. In 1903, the Railway undertook a further
development of its terminal facilities, and the city authorized
several extensions along certain streets, and leased to it a part
of a public wharf. In 1908, the Railway declined to grant a further
lease to the Iron Mountain, and took over the operation of its
property, with the object of enlarging and extending its
facilities, serving the public in that
Page 246 U. S. 462
portion of the city generally, and connecting with all St. Louis
lines by a junction with the St. Louis Transfer Railway.
The principal terminal facilities of the City of St. Louis are
dominated by the Terminal Railroad Association, hereinafter
referred to as the Terminal, a corporation whose capital stock is
owned in equal shares by the 14 trunk lines entering that city. The
Terminal, or its proprietary or tenant lines, owns or controls all
bridges and ferries giving access to terminals within and lines
directly entering St. Louis, so that no interstate shipment can
enter or leave the city except over those lines. In St. Louis,
there are three industrial centers naturally requiring terminal
facilities. The northern section of the city along the Mississippi
River is one of these, and is served by a considerable mileage of
the Terminal and the rails of nine of the trunk lines. In the
western section, in what is known as the Mill Creek Valley, there
are many industries served by a considerable mileage of the
Terminal and the rails of four of the trunk lines. In South St.
Louis, the companies rendering terminal service are the
Manufacturers' Railway and the Iron Mountain. The St. Louis
Transfer Company, one of the subsidiaries of the Terminal, has a
line along the riverbank, physically available only to a negligible
extent, and the lines of the Iron Mountain generally follow the
bank of the river and reach such industries as are adjacent
thereto. For a considerable distance along the river in this
section of the city, there is a steep grade to be overcome in
reaching industries situate back from the river, and to confine
these industries to the terminal facilities of the Iron Mountain
would require a team haul up from the bank of the river. The
Railway's terminals reach the high ground referred to, and, besides
its connection with the Iron Mountain, it constructed in 1908 a
viaduct leading over the Iron Mountain tracks and then descending
to
Page 246 U. S. 463
their level and forming a connection with the tracks of the
Transfer Railway, which lie between the Iron Mountain and the
river. Through the Transfer Railway, it reaches the Terminal, and
through the Terminal reaches all the trunk lines that enter St.
Louis. The Transfer Railway is a corporation whose stock is owned
by the Wiggins Ferry Company, whose stock in turn is owned by some
of the trunk lines that own and control the Terminal.
The St. Louis Southwestern Railway Company, a trunk line
hereinafter called the Cotton Belt, does not reach St. Louis with
its own rails, but enters East St. Louis via the rails of the Iron
Mountain, over which it has trackage rights. In serving industries
within St. Louis, it uses the facilities of the Terminal and of the
various carriers within the city, including the Railway.
By ordinance of the City of St. Louis, the Railway is prohibited
from charging more than $2 per car for local switching. Prior to
March 1, 1910, and including the entire 20-year period covered by
the leases of the Railway to the Iron Mountain, the trunk lines
applied their St. Louis rates to traffic originating at or destined
to industries served by the Railway, absorbing and paying to the
Railway, after the termination of the Iron Mountain lease, a
switching charge of from $3 to $5.50 per car, said to average about
$4.50. The result of this was that shippers served by the Railway
received their transportation at the St. Louis rates without paying
anything additional for the terminal service performed by the
Railway.
At the same time, the trunk lines absorbed the terminal charges
of the Terminal (about $3 per car), and similar allowances or
absorptions were made by the trunk lines to twelve other industrial
lines in and about the city.
About December 31, 1909, the trunk lines, by concerted
Page 246 U. S. 464
action, notified the Railway that from and after March 1, 1910,
they would cancel the tariffs wherein they had applied the St.
Louis rates to industries on the Railway and had absorbed the
Railway's terminal charges. Similar notice was given to the twelve
other industrial lines, and accordingly the allowances were
cancelled at the date notified, but the practice of absorbing the
charges of the Terminal was not discontinued.
On March 4, 1910, the Railway and certain shippers on its line,
including the Brewery, filed a complaint against the trunk lines
before the Commission (I.C.C. Docket No. 3151), in which it was
alleged that the tariff cancellations were, in effect, an unjust
and unlawful refusal by the trunk lines longer to continue through
routes and joint rates theretofore established; that said action
constituted an unlawful discrimination as between industries and
shippers on the lines of the Railway and other industries and
shippers in St. Louis, and subjected the traffic of the Railway to
undue and unreasonable disadvantage, and gave undue and
unreasonable preference to the shipping public in other parts of
St. Louis, and further that the concerted action of the trunk lines
was the result of an unlawful combination and conspiracy, in
violation of the Sherman Anti-Trust Law. Complainants asked that
through routes and joint rates be reestablished to and from points
on the Railway from and to points on each of the trunk lines and
points beyond, and that proper and reasonable divisions of the
through or joint rates be established. There was also a prayer for
reparation and for general relief.
The trunk lines answered, evidence was taken (none, however,
being introduced by the trunk lines beyond such as was brought out
by examination of complainants' witnesses), and, after a hearing,
the Commission, under date June 21, 1911, filed a first report of
its conclusions. 21 I.C.C. 304. It declared that the Railway was
a
Page 246 U. S. 465
common carrier within the provisions of the first section of the
Commerce Act, and not a mere plant facility of the Brewery; that it
supplied reasonable and necessary terminal facilities to many
industries besides the Brewery, and that the payment of it by the
trunk lines of a reasonable and just portion of the St. Louis rates
for the terminal service rendered by it was not unlawful; that the
action of the trunk lines in cancelling the divisions and
absorptions which for many years had been included in the St. Louis
rates had subjected complainant shippers and a considerable portion
of the public of South St. Louis to the payment of unjust and
unreasonable transportation charges and to undue discrimination and
disadvantage; that there had been in effect a failure on the part
of the complainant carrier and defendants to agree to the
apportionment or division of the rates or charges, and this
situation under the statute imposed upon the Commission the duty of
adjusting the matter; that, in view of the peculiar features of the
case detailed in the report (including the heavy shipments to and
from the Brewery and the fact that the same interests owned a
majority of the stock of the Railway and of the Brewery), it was
important that the allowances to the Railway and the services
rendered by it to its patrons in consideration of such allowances
should be equitably adjusted, and that the trunk lines should
closely guard these features in making any allowances or divisions
to the Railway, in order to avoid the charge of unjust
discrimination or undue preference or advantage, but that the
record before the Commission did not present a sufficient basis for
a satisfactory determination of the question as to the reasonable
and just division or allowance to the Railway, and the further
question as to whether a part of the service performed by it was or
was not plant facility service. These questions were reserved for
further examination.
After the hearing, and before the making of this first
Page 246 U. S. 466
report, practically all of the carriers published and filed
tariffs stating allowances or divisions with the Railway. These
were suspended by the Commission pending its decision, and, upon
the making of the first report, an order was entered cancelling the
suspensions, effective July 15, 1911. No other order was made at
that time.
Thereafter a supplemental hearing was had upon which additional
evidence was submitted by the trunk lines, and as a result the
Commission filed its second report, dated June 21, 1913 (28 I.C.C.
93), but still made no order. In this report, the Commission (p.
105) adhered to its former conclusion that the Railway was a common
carrier subject to the act, but in other respects materially
modified its views, now holding: that the payments formerly made
out of their through rates by the trunk lines to the Railway were
absorptions in compensation for services rendered to the trunk
lines, and were not divisions of joint rates as for services
rendered for the shippers served by the Railway, as they would be
considered under joint rates prescribed by order of the Commission;
that, in the absence of any undue discrimination with respect to
these absorptions, the Commission could make no lawful order with
reference thereto; that the defendant trunk lines, in delivering
freight at the St. Louis rates to points on the rails of the
Terminal and in refusing to bear the expense of similar delivery by
the Railway upon its rails, were not subjecting the shippers
located on and served by the Railway to undue prejudice and
disadvantage; that therefore the only lawful order the Commission
could make was in the establishment of joint rates, under which
that part of the service performed by the Railway would be, in the
contemplation of the Commerce Act, a service performed for the
shipper, to be paid for by him, and not a service rendered for the
trunk lines the expense of which could be required by the
Commission to be borne by them; that the trunk line rates to
Page 246 U. S. 467
St. Louis not being shown to be unreasonable in themselves, the
joint rates with the Railway necessarily must be in excess of these
by the amount of the Railway's part of the through charge, and that
joint through rates should be established on that basis. Taking up
the question of the amount to be added to the trunk line rates in
making the joint rates, the existing allowances being, as stated,
from $3 to $5.50 per car, and complainants asking for a uniform
allowance of $4.50 per car, said to be lower on the average, the
Commission called attention to the fact that the Railway's rate for
local shipments between any points on its line was $2 per car,
fixed as a maximum by city ordinance; for intra-plant movements,
availed of only by the Brewery -- that being the only industry
having need for such service -- $1 per car, and for weighing
movements 25 cents per car, and that the Railway had a contract
with the Cotton Belt under which it handled shipments for the
latter, under certain exemptions from liability for damage, for $1
per car, and had offered the same contract to other carriers.
Considering these facts with the other testimony submitted on this
phase of the case, the Commission expressed the opinion that the
division of the joint rates accruing to the Railway should not
exceed $2 per car, saying:
"However, we shall not by definite finding and order fix these
divisions now. This is our original finding with respect to the
establishment of joint rates, and the carriers, in accordance with
the provisions of the act, will be given an opportunity to agree
among themselves."
In conclusion, the Commission announced: "We regard the present
allowances, which, as stated, average slightly above $4.50 per car,
as effecting unlawful results."
Following the partial decision of the Commission in its first
report, most of the trunk lines reinstated the allowances to the
Railway, and those allowances, averaging about $4.50 per car, were
being paid at the time of
Page 246 U. S. 468
the making of the second report. Pursuant to that report, they
were cancelled.
In this situation, the Railway, the Brewery, and other
complainant shippers applied to the Commission for a rehearing, and
the case was reargued and taken under advisement November 13, 1913.
Pending its decision, and on December 7, 1913, the Cotton Belt and
another trunk line, both defendants in I.C.C. Docket No. 3251,
published and filed with the Commission tariffs to become effective
January 7, 1914, providing for absorption of the switching charges
of the Railway up to $4.50 per car. These absorptions were
suspended by order of the Commission December 19, 1913, until May
7, 1914, and by an order dated April 20, 1914, were suspended for a
further period of six months, or until November 7, 1914. The
suspension case was designated as Investigation and Suspension
Docket No. 355, and was treated by the Commission as ancillary to
the principal case, I.C.C. Docket No. 3151.
Under date July 10, 1914, and prior to the expiration of the
second period of suspension, the Commission filed its third and
final report, 32 I.C.C. 100. It affirmed the findings and
conclusions contained in the second report, with an
"interpretation;" still dealt with the Railway as a common carrier;
held that the trunk lines by their action in cancelling the
allowances to the Railway while continuing to absorb the charge of
the Terminal, whose stock they owned, did not subject the Railway
or its shippers to undue prejudice or disadvantage; that the
amounts formerly paid by the trunk lines to the Railway were
voluntary allowances, and could not be considered by the Commission
to be divisions of joint rates which it could by affirmative order
establish; that the separate rates of the trunk lines and of the
Railway being necessarily regarded upon the record before the
Commission as
prima facie reasonable, any joint rates
which
Page 246 U. S. 469
the Commission could by affirmative order require the carriers
in the through route to establish would necessarily be higher than
the trunk line rates to and from St. Louis by the amount of that
part of the through charge which would accrue to the Railway; that,
while the Commission could not require the trunk lines to
participate with the Railway in joint rates no higher than their
rates to St. Louis, they might voluntarily participate on that
basis, provided that in the division they did not pay to the
Railway for its service more than was just and reasonable, and did
not thereby in the amount of the excess indirectly refund to the
Brewery a part of the through transportation charges paid to them
by the Brewery; that the former allowances of $4.50 per car paid by
the trunk lines to the Railway were excessive, and, instead of a
maximum division to the Railway of $2 per car, as suggested in the
second report, upon further consideration, the view was expressed
that the division accruing to the Railway should not exceed $2.50
per car, subject to modification upon further hearings with respect
to divisions if the necessity should arise.
In announcing its purpose to make an order requiring the
establishment and maintenance by complainant Railway and defendant
trunk lines of maximum joint rates not exceeding the St. Louis
rates of the trunk lines by more than $2.50 per car, the Commission
declared that, when this had been done, whether the carriers in the
through routes should establish rates on that maximum basis, or by
voluntary agreement on a basis not higher than the St. Louis rates,
then, upon failure of the trunk lines and the Railway to agree upon
the proper basis of division, and upon request made to the
Commission for the purpose, it would fix the divisions upon further
investigation as provided in the act; if that inquiry should
confirm its present impression that $2.50 per car was a reasonable
division to the Railway, that would be granted,
Page 246 U. S. 470
and if, on the other hand, the Commission should be convinced by
the evidence that $2.50 per car was too much or not enough, it
would fix the amount accordingly, and that, if not asked by the
carriers to fix the divisions, the Commission, upon proper cause
appearing, might in its discretion institute an inquiry upon its
own motion, under those provisions of the act which forbid the
giving or receiving of rebates or undue concessions, directly or
indirectly, by any device whatsoever, having in mind particularly
the fact of the common ownership of Railway and Brewery stock.
Thereupon an order was made under I.C.C. Docket No. 3151, dated
July 10, 1914, requiring the trunk lines and the Railway, on or
before January 1, 1915, to cease and desist from charging their
then present rates on traffic between points on the line of the
Railway and points on the trunk lines in other states to the extent
that those rates exceeded contemporaneous St. Louis rates by more
than $2.50 per car, and to put in force on or before the same date
and maintain thereafter for a period of not less than two years
rates applicable to traffic on the Railway not exceeding rates
contemporaneously in effect between St. Louis and points in other
states by more than $2.50 per car.
At the same time, and upon the the basis of the same report, an
order was made under I. & S. Docket No. 355, cancelling the
Cotton Belt tariff that had been suspended by the orders of
December 19, 1913, and April 20, 1914.
The former order of July 10 was attacked in a suit brought in
the district court by the Railway, in which the Brewery and other
shippers on the line of the Railway intervened as co-petitioners.
Answers were filed by the United States and the Interstate Commerce
Commission, evidence was taken, and, upon final hearing, the suit
was dismissed without opinion. No. 25 is an appeal from
Page 246 U. S. 471
this decree. The orders of April 20 and July 10 under I. &
S. Docket No. 355 were the subject of attack in a suit by the
Railway and the Cotton Belt, in which answers were filed by the
United States and by the Interstate Commerce Commission, and upon
evidence taken, the court, without opinion, dismissed the petition.
From this decree the appeal in No. 24 was taken.
Page 246 U. S. 477
MR. JUSTICE PITNEY, having made the foregoing statement,
delivered the opinion of the Court.
It will be convenient to dispose first of No. 25.
The scope of the order of July 10, 1914, under I.C.C. Docket No.
3151, is simple and limited; the grounds of attack upon it are many
and diverse, and based rather upon what it does not, than upon what
it does, require to be done. As is pointed out in the prefatory
statement, the complaint before the Commission was made by the
Railway, the Brewery, and certain other shippers served by the
Railway. The respondents were the trunk lines. The complaint
charged that the then recent tariff cancellations were, in effect,
a refusal to continue through routes and joint rates from and to
points on the line of the Railway; alleged that this constituted
unreasonable discrimination between shippers on the line of the
Railway and other shippers in the City of St. Louis, and subjected
the former to undue prejudice and disadvantage, contrary to §
3 of the Commerce Act (24 Stat. 379, 380, c. 104), and prayed that
the trunk lines be required to reestablish the through routes and
joint rates as they existed before the cancellations, that the
reasonable divisions of the rates be determined, and that due
reparation be awarded to the complainants, with such other relief
as the Commission might deem necessary. The order under
consideration, recognizing through routes as being already in
effect (a fact about which there is no dispute), required the
Railway and the trunk lines to establish, and for at least two
years to maintain, rates not exceeding by more than $2.50 per car
the trunk line rates contemporaneously in effect between St. Louis
and points in other states.
It is urged that the cancellation of the absorption tariffs on
March 1, 1910, constituted an increase of the former rates because
it curtailed the service to be rendered under those rates; that the
former absorptions presumably resulted in reasonable rates
(
Interstate Commerce Commission v. Chicago, Burlington &
Quincy R. Co., 186 U. S. 320,
186 U. S.
336); that, by the "increased rate clause" of § 15
of the Commerce Act as amended in 1910 (36 Stat. 552, ch. 309),
[
Footnote 1] the burden was
upon the trunk lines to show
Page 246 U. S. 479
the reasonableness of the new rates, and that, there being no
evidence to sustain their reasonableness
per se, the
Commission erred in law in failing to set them aside by restoring
the former absorptions.
But this clause of § 15, by the fair import of its terms,
imposes upon the carrier the burden of proving the new rate to be
just and reasonable only where that question is involved in the
hearing; it does not call for proof as to matters not in
controversy. As the Commission pointed out in its several reports
(21 I.C.C. 308; 28 I.C.C. 100, 101, 103, 105, 110; 32 I.C.C. 102,
105), the complaint was not directed to the reasonableness of the
separate rates either of the Railway (one of the complainants) or
of the trunk lines. The effort was to require the reestablishment
of the former absorptions on the ground that, without them, the
continued practice of absorbing the charges of the Terminal
constituted a discrimination as against shippers on the line of the
Railway. And when the question of discrimination was finally
decided against the contention of the complainants, and the claim
of the Railway to be regarded as a common carrier was decided in
their favor (both conclusions being supported by adequate
evidence), it appearing that through routes actually were in effect
after as before the cancellations, the Commission deemed it
unnecessary to do more at that time than to fix a maximum for the
joint rates, and then await the voluntary action of the Railway and
the trunk lines about establishing joint rates within the maximum,
and agreeing between themselves respecting divisions.
The question of the reasonableness of the allowances or
divisions made and to be made to the Railway came into the case
incidentally, but inevitably, because of the heavy shipments to and
from the Brewery and the community of interest between it and the
Railway. Upon this point there was abundant evidence to support the
conclusion of the Commission that, in making up the
Page 246 U. S. 480
joint rates, not more than $2.50 per car should be added to the
trunk line rates to St. Louis, and the intimation (not final, and
not carried into the order) that any division to the Railway out of
the joint rate in excess of $2.50 per car would amount to an undue
preference or indirect rebate to the Brewery. Beyond this, no
question of separate rates was involved, and the Commission did not
err, in view of the issues, in assuming the trunk line rates to be
reasonable
per se. Although it might have dealt with the
divisions in the same order, so far as necessary to prevent undue
favoring of the Brewery (
O'Keefe v. United States,
240 U. S. 294,
240 U. S.
300-302), it was within the discretion of the Commission
to allow the carriers to make their own agreement upon the subject,
as contemplated by the first paragraph of § 15 of the act (36
Stat. 551), subject to its review.
It is insisted that the "advanced rates" resulting from
cancelling the absorptions were presumptively unreasonable because
not established by free competition, but by concerted action in
furtherance of the aims of the Terminal Railroad Association of St.
Louis, held by this Court to be an unlawful combination in
restraint of interstate commerce.
United States v. St. Louis
Terminal, 224 U. S. 383. But
our decision in that case (
224 U. S. 224
U.S. 412;
236 U. S. 236
U.S. 207-209) left untouched the powers of the Interstate Commerce
Commission. Besides, appellants sought no special relief because of
the Anti-Trust Act. Hence, at the utmost, they were only entitled
to have the Commission consider the nature and objects of the
Terminal Association as circumstances bearing upon the question of
discrimination and other questions to which they were pertinent,
and this the Commission did. 21 I.C.C. 308, 314; 28 I.C.C. 98,
104-106, 109-110; 32 I.C.C. 102.
It is insisted, however, that the finding to the effect that it
was not an undue or unjust discrimination for the trunk lines to
refuse to absorb the Railway's charges and
Page 246 U. S. 481
thereby extend their flat St. Louis rates to the territory
served by the Railway, while doing so with respect to the territory
served by the Terminal, is contrary to the indisputable character
of the testimony and inconsistent in law with the very facts found
by the Commission. To this we cannot accede. It is not any and
every discrimination, preference, and prejudice that are denounced
by the Commerce Act. Section 3 (Act of February 4, 1887, c. 104, 24
Stat. 379, 380) renders unlawful any "
undue or
unreasonable" preference or advantage, prejudice or
disadvantage. In the same section, the requirement of "all
reasonable, proper, and equal facilities for the interchange of
traffic" is qualified so as not to require one carrier to give the
use of its tracks or terminal facilities to another. And in the
first paragraph of amended § 15 (36 Stat. 551), it is rates,
regulations, or practices that in the opinion of the Commission are
"
unjustly discriminatory, or unduly preferential or
prejudicial," etc., to which the prohibition is to be applied.
Whether a preference or advantage or discrimination is undue or
unreasonable or unjust is one of those questions of fact that have
been confided by Congress to the judgment and discretion of the
Commission (
Interstate Commerce Commission v. Alabama Midland
Ry. Co., 168 U. S. 144,
168 U. S.
170), and upon which its decisions, made the basis of
administrative orders operating
in futuro, are not to be
disturbed by the courts except upon a showing that they are
unsupported by evidence, were made without a hearing, exceed
constitutional limits, or for some other reason amount to an abuse
of power. This results from the provisions of §§ 15 and
16 of the Commerce Act as amended in 1906 and 1910 (34 Stat.
589-591, c. 3591; 36 Stat. 551-554, c. 309), expounded in familiar
decisions.
Interstate Commerce Commission v. Illinois Central
R. Co., 215 U. S. 452,
215 U. S.
469-470;
Interstate Commerce Commission v. Union
Pacific R. Co., 222 U. S. 541,
222 U. S. 547;
Procter
&
Page 246 U. S. 482
Gamble v. United States, 225 U.
S. 282,
225 U. S.
297-298;
Interstate Commerce Commission v.
Louisville & Nashville R. Co., 227 U. S.
88,
227 U. S.
91.
In the present case, the negative finding of the Commission upon
the question of undue discrimination was based upon a consideration
of the different conditions of location, ownership, and operation
as between the Railway and the Terminal. 28 I.C.C. 104, 105; 32
I.C.C. 102. The conclusions were reached after full hearing, are
not without support in the evidence, and we are unable to say that
they show an abuse of discretion. It may be conceded that the
evidence would have warranted a different finding; indeed, the
first report of the Commission was to the contrary; but to annul
the Commission's order on this ground would be to substitute the
judgment of a court for the judgment of the Commission upon a
matter purely administrative, and this cannot be done.
United
States v. Louisville & Nashville R. Co., 235 U.
S. 314,
235 U. S. 320;
Pennsylvania Co. v. United States, 236 U.
S. 351,
236 U. S. 361.
The common use of the St. Louis Terminal by the fourteen trunk
lines under a single arrangement as to absorption of the terminal
charges does not, as matter of law, entitle the Railway, which has
no trunk line and does terminal switching alone, to precisely the
same treatment.
United States v. St. Louis Terminal,
224 U. S. 383,
224 U. S.
405-406;
Louisville & Nashville R. Co. v. United
States, 242 U. S. 60.
Criticism is directed to the somewhat abstruse distinction drawn
by the Commission between allowances or absorptions made by trunk
lines in compensation for services rendered to them and divisions
out of joint rates as for services rendered for the shippers (28
I.C.C. 101-106; 32 I.C.C. 102); but we deem it unnecessary to
discuss the point.
See Tap Line Cases, 234 U. S.
1,
234 U. S. 28;
United States v. Butler County R. Co., 234 U. S.
29,
234 U. S. 35-36;
O'Keefe v. United States, 240 U.
S. 294,
240 U. S.
302.
It hardly can have escaped attention that the real complaint
Page 246 U. S. 483
of appellants respecting the order now under consideration is
directed not to what the order requires to be done, but to what it
does not require. It granted a part of the relief for which
appellants had applied to the Commission. Recognizing the Railway
as a common carrier to which allowances and divisions might be
accorded by the trunk lines, and that through routes were in
operation between the Railway and those lines, it fixed the maximum
joint rates, and went no further for the present. The real ground
for resorting to the courts in this case is the failure to fix
divisions. In effect, the district court was asked to perform a
function specifically conferred by law upon the Commission. But
that court has only the same jurisdiction that formerly was vested
in the Commerce Court (Act of June 18, 1910, c. 309, 36 Stat. 539;
Act of October 22, 1913, c. 32, 38 Stat. 208, 219), and it is
settled that this does not permit the court to exercise
administrative authority where the Commission has failed or refused
to exercise it, or to annul orders of the Commission not amounting
to an affirmative exercise of its powers.
Procter & Gamble
v. United States, 225 U. S. 282,
225 U. S. 292
et seq.
Complaint is made because reparation was not awarded. But we are
unable to see that proper foundation was laid for this in the
evidence submitted to the Commission.
Nothing more need be said concerning No. 25.
The first question raised in No. 24 is based upon the language
of the second paragraph of § 15 of the Commerce Act, inserted
by the amendment of June 18, 1910, c. 309, 36 Stat. 539, 552.
[
Footnote 2] It is said that
the tariff published by
Page 246 U. S. 484
the Cotton Belt December 7, 1913, was a new tariff within the
meaning of this provision, and while the Commission was authorized,
either upon complaint or on its own initiative, to suspend its
operation pending a hearing, this suspension must not be for a
longer period than 120 days beyond the time when the tariff would
otherwise go into effect unless the hearing could not be concluded
within that period, in which case alone the Commission might extend
the time of suspension of a further period not exceeding six
months. It is contended that no hearing on the matters involved in
the suspended tariff was begun within the 120 days, and therefore
the second order of suspension, and also the order cancelling this
tariff, were arbitrary and unlawful, the argument being that the
issues involved in I.C.C. Docket No. 3151 were not the same as
those presented in the matter of the suspended tariff, I. & S.
Docket No. 355, and hence there was no hearing whatever on the
latter.
Page 246 U. S. 485
The form of the orders made by the Commission in I. & S.
Docket No. 355 lends color to this argument. The order of December
19, 1913, makes no reference to the proceedings then pending in
I.C.C. Docket No. 3151, treats the tariff recently filed as
"stating new individual regulations and practices affecting rates
and charges," declares that the Commission will enter upon a
hearing concerning their propriety, and directs that their
operation be postponed until the seventh of May, while the order of
April 20 refers to the former one, recites that "such hearing
cannot be concluded within the period of suspension above stated,"
and orders a further suspension until the 7th of November.
But it is not suggested, and there is no ground for supposing,
that the parties were misled by the form of these orders. They were
parties to I.C.C. Docket No. 3151, then pending. The Cotton Belt
was one of the carriers which had cancelled the former tariffs
authorizing allowances averaging $4.50 per car to the Railway, and
the Railway having complained to the Commission of its action, it
answered declaring, among other things, that it cancelled the
tariff for the reason that it was advised that the allowances
theretofore made to the Railway were illegal because the Railway
was merely an industrial or tap line, and, under the law, not
entitled to any part of the through rate, and further that, if the
Railway was entitled to compensation as a carrier, it was not
entitled to receive from the Cotton Belt any allowance out of the
through rate, that, if entitled to any it was not entitled to the
allowance theretofore paid to it under the cancelled tariff, and
that the allowance given to the Railway was unreasonable,
excessive, and unjust.
The issues raised by this answer and by the answers of the other
defendant trunk lines, which are briefly recited in the first
report (21 I.C.C. 307) but need not be here repeated, necessarily
involved, and were treated by the
Page 246 U. S. 486
Commission as involving, the question how such could be allowed
by the trunk lines to the Railway out of the through rate without
amounting to an undue preference or indirect rebate to the Brewery
because of the common control of the Brewery and the Railway.
Special attention was called to this in the first report, as
appears from what has been recited in the statement prefacing this
opinion. And it is obvious that the same consideration was inherent
in the case, whether the payments by the trunk lines to the Railway
were considered as divisions of joint rates for services rendered
for the shippers served by the Railway or absorptions in
compensation for services rendered by the Railway for the trunk
lines. In either case, if the allowances to the Railway were made
unduly large, the Brewery's share of the profit accruing from them
would amount to an indirect preference to the Brewery.
Tap Line
Cases, 234 U. S. 1,
234 U. S. 28;
O'Keefe v. United States, 240 U.
S. 294,
240 U. S.
301-302. Accordingly, in the second report (28 I.C.C.
107), the Commission said:
"Complainant railway itself concedes that this question of the
amount of the allowance to the Railway, but not the question of
whether a reasonable allowance should be made, is a matter for
closer investigation owing to the common ownership of the stock of
the Railway and of the Brewery, its statement in this respect,
however, being based, of course, upon the understanding that the
allowance was to come from the trunk lines."
And, in the concluding part of its report, the Commission stated
(p. 111):
"Should one or more of the trunk lines attempt to pay to the
Railway [more than] the $2 per car which we suggest herein as being
in our opinion reasonable for the latter's shippers to pay for its
service, another question would be presented in which would figure
the fact, much discussed in the record, of the common ownership of
the stock of the Railway and of the Brewery. That question would
not arise primarily under § 15 of the act, but under those
sections
Page 246 U. S. 487
which seek to prohibit the giving of unlawful concessions by any
device whatsoever. It follows from what we have said herein that we
regard the present allowances, which, as stated, average slightly
above $4.50 per car, as effecting unlawful results."
This was on June 21, 1913; pursuant to the report, the
criticized allowances were cancelled, and on November 13 in the
same year the case was submitted to the Commission upon a rehearing
at the instance of the Railway. The Cotton Belt remained a party to
the proceeding. The issues raised by its answer had not been
finally disposed of, nor its answer withdrawn. Since it involved
the public interests, and not merely those of the Cotton Belt, this
particular issue hardly could be withdrawn.
The question of the validity of the previous allowances,
approximately $4.50 per car, or of any allowance greater than $2
per car, being thus bound up in the pending controversy under
I.C.C. Docket No. 3151, the Cotton Belt tariff published December
7, 1913, while the Commission had that controversy under
advisement, manifestly was an attempt to forestall the decision.
There was no error in suspending it pending the decision. And,
there being nothing further to be submitted to the Commission in
the way of evidence or argument, it was natural, and not
inconsistent with the substantial rights of the parties, for the
Commission to treat the suspension of the Cotton Belt tariff as a
proceeding ancillary to the other, involving no different question
on the merits.
The final order setting this tariff aside necessarily rested
upon a finding that the proposed absorption was was so unduly large
as to amount to a preference or indirect rebate to the Brewery. In
orders of this kind, not including an award of damages, formal and
precise findings no longer are necessary, § 14 having been
amended in this respect by Act of June 29, 1906, c. 3591, 34 Stat.
584, 589.
See House Report No. 591, 59th Congress, 1st
Sess. p. 4, explaining this provision of the bill.
Page 246 U. S. 488
What we have said disposes at the same time of the only
objection raised against the order of April 20, 1914.
The Railway makes the additional contention that the order of
July 10, 1914 (I. & S. Docket No. 355), prohibited the Cotton
Belt from paying to the Railway as much as $4.50 per car for its
services, and that it amounted to a taking of the Railway's
property without due process of law in violation of the Fifth
Amendment, because any rate less than that named would be
confiscatory. That the order has the effect of prohibiting the
Cotton Belt from paying to the Railway as much as $4.50 per car is
alleged in the petition of the appellants and admitted in the
answer of the United States, and we take it for granted that this
is so. It is argued that it was operative upon all the trunk lines,
and it is contended that payments by all of these lines upon all
interstate car interchanges of any rate less than $4.50 per car
would not yield in the aggregate a reasonable return upon the fair
value of the Railway's property devoted to the use of interstate
commerce.
As a part of the argument, it is urged that the decision of the
Commission actually limits the earnings of the Railway to $2.50 per
car, alleged to be wholly inadequate. But the order under attack in
this suit has no such effect, and the contemporaneous order under
I.C.C. Docket No. 3151 merely limits the joint rates to not
exceeding $2.50 in advance of the St. Louis rates, and does not
deal with the divisions, the opinion expressed upon this point
being only tentative.
Appellees contend that the finding of the Commission upon the
subject of confiscation is conclusive, or at least that it is not
subject to be attacked upon the evidence not presented to the
Commission, as is attempted here. We cannot sustain this objection
in its entirety. It is true that, so long as the Commission
proceeds in accordance with the requirements of the Commerce Act
and its amendments, and with proper regard for constitutional
restrictions, its
Page 246 U. S. 489
administrative orders, not calling for the payment of money, if
made after due hearing and supported by evidence, are not subject
to attack in the courts. This, as we have seen, results from the
provisions of §§ 15 and 16 of the act as amended.
Interstate Commerce Commission v. Illinois Central R. Co.,
215 U. S. 452,
215 U. S.
469-470;
interstate Commerce Commission v. Union
Pacific R. Co., 222 U. S. 541,
222 U. S. 547;
Interstate Commerce Commission v. Louisville & Nash. R.
Co., 227 U. S. 88,
227 U. S. 91.
But these cases recognize that matters of constitutional right are
not to be conclusively determined by the Commission, and we are not
prepared to say that a party is debarred from attacking an order of
the Commission upon constitutional grounds even though they were
not taken in the hearing before that body.
Nevertheless, correct practice requires that, in ordinary cases,
and where the opportunity is open, all the pertinent evidence shall
be submitted in the first instance to the Commission, and that a
suit to set aside or annul its order shall be resorted to only
where the Commission acts in disregard of the rights of the
parties. This was recognized before the amendment of 1906, and
when, by §§ 14, 15, and 16 of the original Act of
February 4, 1887, c. 104, 24 Stat. 379, 384, as amended by Act of
March 2, 1889, c. 382, 25 Stat. 855, the findings made by the
Commission upon questions of fact were limited in their effect to
that of
prima facie evidence in all cases, and not only,
as now, in reparation cases.
Cincinnati, New Orleans &
Texas Pacific Ry. v. Interstate Commerce Commission,
162 U. S. 184,
162 U. S. 196;
Texas & Pacific Ry. Co. v. Interstate Commerce
Commission, 162 U. S. 197,
162 U. S. 235,
162 U. S. 238;
Louisville & Nashville R. Co. v. Behlmer, 175 U.
S. 648,
175 U. S. 675;
East Tennessee, etc., Ry. Co. v. Interstate Commerce
Commission, 181 U. S. 1;
Illinois Central R. Co. v. Interstate Commerce Commission,
206 U. S. 441,
206 U. S. 454.
The 1906
Page 246 U. S. 490
amendment, in modifying § 14 so as to dispense with the
necessity of formal findings of fact except in cases where damages
(or reparation) are awarded, and §§ 15 and 16 so as to
give a greater effect than before to the orders of the Commission
other than those requiring the payment of money, renders it not
less, but more, appropriate that, so far as practicable, all
pertinent objections to action proposed by the Commission and the
evidence to sustain them shall first be submitted to that body.
Hence, we cannot approve of the course that was pursued in this
case of withholding from the Commission essential portions of the
evidence that is alleged to show the rate in question to be
confiscatory. Certainly where the Commission, after full hearing,
has set aside a given rate on the ground that it is unreasonably,
high it should require a clear case to justify a court, upon
evidence newly adduced but not in a proper sense newly discovered,
in annulling the action of the Commission upon the ground that the
same rate is so unreasonably low as to deprive the carrier of its
constitutional right of compensation.
However, the issue is in the case, and must be dealt with. In
order to show that any rate less than $4.50 would be
noncompensatory, the Railway undertook to demonstrate that the full
$4.50 would not pay the cost of transportation and yield a just
return upon the value of its property. Yet the rates voluntarily
established by the Railway prior to the commencement of the present
controversy averaged about $4.50 per car, a $4.50 rate was provided
for in a tariff issued by the Railway in February, 1913, a uniform
allowance of this amount was asked for by it upon the second
hearing before the Commission, and the Railway concurred in, and
now seeks to maintain, the Cotton Belt tariff which contemplated
payment of that rate for its services. Besides, the rate may be
compared with $3 per car charged by the Terminal for similar
services, $2 per car fixed by city ordinance
Page 246 U. S. 491
as the Railway's maximum charge for local shipments between any
points on its line, the charge of $1 per car voluntarily
established by the Railway for intra-plant movements, 25 cents per
car for weighing movements, and the special charge of $1 per car on
limited liability, obtaining between the Railway and the Cotton
Belt and offered to other carriers. The evidential effect of the
Railway's voluntary action is obvious.
Interstate Commerce
Commission v. Chicago, Burlington & Quincy R. Co.,
186 U. S. 320,
186 U. S.
336.
Moreover, upon the second hearing before the Commission
(January, 1912), Mr. Moore, the President of the Railway,
testifying in its behalf upon the very point and from a full
knowledge of the operations of the company and its property and
expense accounts, stated:
"The revenue which we are now receiving for all kinds of service
performed by the Manufacturers' Railway Company is sufficient to
pay operating expenses, taxes, rentals, and other fixed charges and
7 percent on the investment."
The evidence produced by the Railway before the district court,
while quite inconsistent with these concessions, is adduced as a
mathematical demonstration that the $4.50 rate is confiscatory. The
principal witnesses were an expert in the valuation of railways,
two real estate experts, and Mr. Moore, the President of the
Railway. Opinion evidence was relied upon, basing values on
estimated cost of reproduction less depreciation, it being stated
that the records of the Railway had been kept in such a way as not
to show the actual cost. A table was presented ("Summary D")
stating the entire value of the property of the Railway on January
1, 1915 at $2,215,353.78, and deductions were made of capital
expenditures during the previous eighteen months in order to show
the value as of June 30, 1913, and June 30, 1914. It was attempted
to assign to the interstate business a proportion of the total
value corresponding to the extent
Page 246 U. S. 492
of its employment in that business.
Minnesota Rate
Cases, 230 U. S. 352,
230 U. S. 461.
The value of the property as of June 30, 1913, according to the
estimates, was $2,086,474.98, and it being found that the
interstate car movements during the preceding fiscal year were
79.58 percent of the total traffic, an application of this
percentage to the total value gave $1,659,227.08 as the proportion
of the value of the property, based on use, assigned to interstate
traffic for the fiscal year 1913. Operating expenses, taxes, and
rentals for the same year were said to amount to $195,628.80, of
which 79.58 percent, or $155,681.39, was apportioned to interstate
business. The gross revenue from interstate business for the same
year, on the assumed basis of $4.50 per car from all trunk lines on
all car interchanges, was calculated to be $217,309.25. Deducting
from this the apportioned expenses ($155,681.39) would leave a net
revenue of $61,627.86, or only 3.7 percent of $1,659,227.08, the
value of the property assigned on the basis of use to interstate
traffic as of June 30, 1913.
Similar processes showed apparent net earnings of only 1.86
percent for the fiscal year ending June 30, 1914, and .77 percent
for the six months ending December 31, 1914.
The calculations are complex, and we need not reproduce them in
detail. We have indicated the outlines, and will analyze the
figures only far enough to show that they do not amount to a
demonstration.
By way of contrast to the results deduced from opinion evidence
concerning values, it should be remarked that Mr. Moore testified
in the district court that, at the commencement of his connection
with the company in February, 1909, he could only find an apparent
book value amounting to $300,899.65, which he believed, however,
did not reflect the value of the railway property at that time, and
that, down to January 31, 1915, there had been improvements and
additions to the equipment
Page 246 U. S. 493
amounting to $560,008.75, and additions to real estate amounting
to $525,349, making a total book value of $1,386,257.40. By
deducting $128,878.80 for capital expenditures subsequent to June
30, 1913, we get $1,257,378.60 as the total value on that date, of
which 79.58 percent, or $1,000,621.89, would represent the value
assigned to the interstate business according to the formula, and
upon this amount, the calculated net revenue of $61,627.86 would
yield over 6 percent
Returning to the calculation relied upon by the Railway, Summary
D includes an item "Present Value of Leases, $757, 102."
This is the sum of two items, explained as follows: the Railway
holds under lease from the Brewery all the lands occupied by its
tracks and certain tracks owned by the Brewery within what is
described as the "Brewery Zone," bounded by Lynch Street on the
north, First Street on the east, Utah Street on the south, and
Thirteenth Street on the west, the rental being $24,000 per annum,
and the lease having seventeen years to run from January 1, 1915.
The real estate experts valued this according to its area in square
feet, and by this process arrived at $1,377,853 as its market
value. The rental value on a 5 percent basis would be $68,892.65.
Since, by the terms of the lease, the lessor was required to pay
the taxes, estimated at about $6,000, reducing the net income to
about $18,000, this sum was deducted from $68,892.65, leaving
$50,892.65 as the annual value of the lease to the Railway for the
unexpired term of seventeen years, and the cash value of an annuity
of the amount for that term, said to be $573,767, was taken as the
capital value of the lease. [
Footnote 3] Again, the Railway
Page 246 U. S. 494
holds certain property in its River Yard under lease from the
City of St. Louis at an annual rental of $4,000, expiring October
7, 1934. This property was estimated by the witnesses to be worth
$376,309, 5 percent of which is $18,815.45, and this amount less
$4,000 was taken to be the annual value of the lease, which,
capitalized for 19 years 9 months and 7 days, the unexpired term
from January 1, 1915 (date of valuation), gave $183,335 as the
value of this lease to the lessee.
We are not convinced that these somewhat speculative valuations
of the leaseholds, even if the calculations were otherwise correct,
ought to be included in the value of the Railway's property for the
present purpose.
The lease from the Brewery includes sidings, tracks, and yards,
some of which are of special value to the Brewery but either are
inaccessible to the general public served by the tracks of the
Railway or are practically monopolized for plant use by the
Brewery. The Commission, in its Second Report, 28 I.C.C. 96,
described the conditions. [
Footnote
4] The original lease from the Brewery to
Page 246 U. S. 495
the Railway, dated December 31, 1908, drew a distinction between
tracks and sidings, leasing the former and excluding the latter, as
to which, however, it contained this clause:
"Said Association further gives and grants to said Railway the
right and privilege to use and operate the aforesaid sidings for
railway purposes, upon condition, however, that such use will never
interfere with the reasonable use thereof by said Association, of
which said Association shall be the sole and only judge."
This was made the subject of criticism at the first hearing
before the Commission, and in consequence, the lease was amended
before the second hearing so as to omit this limitation (28 I.C.C.
97). But the evidence tends to show, if it does not render it
clear, that certain years and tracks representing more than
one-third of the aggregate value of the leased lands are used
almost, if not quite exclusively, by the Brewery, and raises a
question whether some of the other yards, or portions of them, are
not, like those mentioned, actually used rather as parts of the
Brewery plant than as parts of the transportation system of the
Railway.
Page 246 U. S. 496
The finding of the Commission that the Railway is, for the
purposes of its decision, a common carrier (a finding not now in
question) does not have the necessary effect of impressing all of
its property with the character of property employed in the service
of the public. The Commission recognized that there was a question
whether a part of the service performed by the Railway was not a
plant-facility service, rather than that of a common carrier. 21
I.C.C. 316. And, under the peculiar circumstances of the case, we
prefer to accept the reserved rental of $24,000, voluntarily fixed
by the parties most concerned at a time antedating the present
controversy, as more reliable evidence of the annual value of the
rights conferred upon the Railway as a carrier than the opinions of
the experts based upon the theory that, by the lease, the entire
value of the property was devoted to the public use.
The lease from the city to the Railway is not in the printed
transcript, but the substance of the ordinance authorizing it is
stated. It granted authority to construct, maintain, and operate
tracks upon land of which a considerable part constituted a public
wharf. If the stipulated rental is less than the fair annual value
of the property, it is to be presumed that the grant of the excess
was to the public, not to the private, interest of the Railway. We
are at a loss to see upon what principle a presumed annual value of
the leasehold in excess of the stipulated rent can be capitalized
as assets of the Railway for the use of which in commerce the
public is required to pay tolls. This would give to the lease the
effect of converting public property
pro tanto into
private property.
Deducting the value of leases, $757,102, from $2,086,474.98, the
estimated value of the Railway's property as of June 30, 1913,
would leave $1,329,372.98, of which 79.58 percent, or
$1,057,915.02, would represent the value assigned to the interstate
business according to the
Page 246 U. S. 497
formula, and upon this amount the calculated net revenue of
$61,627.86 would yield over 5.8 percent
The calculations of revenue and expenses also require revision.
The gross revenue from interstate business, as stated, includes not
merely that derived from car interchanges at $4.50 per car, of
which in the fiscal year ending June 30, 1913, there were 45,602
cars, producing $205,209, but, in addition, there was short-haul
interchanges, 4,975 cars at the city rate of $2 per car, producing
$9,950, inter-plant and intra-plant movements, 1,206 cars at $1 per
car, producing $1,206, and weighing movements, 3,777 cars at 25
cents, producing $944.25, making a total of $217,309.25. The
evidence renders it clear that the cost of these different
movements is not and cannot be segregated, and Mr. Moore himself
testified in effect that it costs the same to the Railway to weigh
a car upon which 25 cents revenue is received as to make an
intra-plant switch of a car for which $1 is received, or a city
movement limited by ordinance to $2, or an interchange delivery for
which $4.50 is the rate assumed for the purposes of the test. The
plant movements are for the benefit of the Brewery alone, that
being the only industry having need for such service; weighing
movements likewise appear to be independent of transportation in
commerce. The limit of $2 fixed by the ordinance for the city
movements seems to have been a part of the consideration for the
grant to the Railway of rights in the streets, and, on this theory,
any deficiency of revenue is properly apportionable to the traffic
participating in these movements. But as to the other movements,
the method of calculation adopted apportions the cost between the
different classes according to the revenue derived from each,
rather than according to the cost or value of the service.
If the plant and weighing movements -- all of the former and
three-fourths of the latter being performed for the Brewery -- were
charged at (say) $2.50 per car, instead of the
Page 246 U. S. 498
rates voluntarily adopted, the gain of revenue would be more
than $10,000 -- approximately 1 percent upon the entire
$1,057,915.02.
The evidence submitted upon the issue of confiscation suggests
other questions that need not be discussed or even mentioned, but
we must not be understood as accepting what we have not
particularly criticized. It is sufficient to say there is a failure
to prove that the rate is unremunerative.
Decrees affirmed.
MR. JUSTICE HOLMES took no part in the consideration or decision
of these cases.
[
Footnote 1]
"At any hearing involving a rate increased after January first,
nineteen hundred and ten, or of a rate sought to be increased after
the passage of this act [June 18, 1910], the burden of proof to
show that the increased rate or proposed increased rate is just and
reasonable shall be upon the common carrier, and the commission
shall give to the hearing and decision of such questions preference
over all other questions pending before it and decide the same as
speedily as possible."
[
Footnote 2]
"Whenever there shall be filed with the Commission any schedule
stating a new individual or joint rate, fare, or charge, or any new
individual or joint classification, or any new individual or joint
regulation or practice affecting any rate, fare, or charge, the
Commission shall have, and it is hereby given, authority, either
upon complaint or upon its own initiative without complaint at
once, and if it so orders, without answer or other formal pleading
by the interested carrier or carriers, but upon reasonable notice,
to enter upon a hearing concerning the proprietary of such rate,
fare, charge, classification, regulation, or practice, and, pending
such hearing and the decision thereon, the Commission, upon filing
with such schedule and delivering to the carrier or carriers
affected thereby a statement in writing of its reasons for such
suspension, may suspend the operation of such schedule and defer
the use of such rate, fare, charge, classification, regulation, or
practice, but not for a longer period than one hundred and twenty
days beyond the time when such rate, fare, charge, classification,
regulation, or practice would otherwise go into effect, and, after
full hearing, whether completed before or after the rate, fare,
charge, classification, regulation, or practice goes into effect,
the Commission may make such order in reference to such rate, fare,
charge, classification, regulation, or practice as would be proper
in a proceeding initiated after the rate, fare, charge,
classification, regulation, or practice had become effective:
Provided, that, if any such hearing cannot be concluded
within the period of suspension, as above stated, the Interstate
Commerce Commission may, in its discretion, extend the time of
suspension for a further period not exceeding six months."
[
Footnote 3]
The process is clearly erroneous. Payment of taxes by lessor is
for its own account, not for lessee's. Annual cost of leasehold to
lessee is measured by gross rental paid, irrespective of what
lessor does with the money.
[
Footnote 4]
The squares bounded by the streets Ninth, Thirteenth, Lynch, and
Dorcas; Ninth, Eleventh, Pestalozzi, and Arsenal, and Second,
Broadway (Broadway being just south of Seventh), Pestalozzi, and
Arsenal are devoted to buildings and yards of the Brewery
exclusively. Although within these bounded areas there are also
others in addition to the three following-named departments, they
will, for the sake of convenience, be referred to as the bottling
department, Budweiser department, and keg department, respectively.
The tracks serving all three of these departments are in and
between buildings and sheds of the Brewery or in the yards
adjoining, and are practically enclosed -- on some sides by
buildings with passageways between and on the other sides by fences
or walls surrounding the yards contiguous to the buildings. All of
the tracks within these yards are essential to the operation of the
Brewery except four team tracks in the yards contiguous to the
bottling department at Ninth and Dorcas. As bearing upon the
accessibility by the public to these various departments, it may be
explained that the tracks in the open yard of the bottling
department -- that is, on the Ninth and Dorcas Street sides -- are
enclosed by an iron fence on which are displayed "No Thoroughfare"
signs, and that the four public team tracks in this yard, referred
to, end on the edge of an embankment supported by a concrete wall
built up from Ninth Street, which is some 10 or 12 feet below, and
topped with an iron fence; that the tracks at the Thirteenth street
side of his department are ended some 10 or 15 feet below the
street level by a stone wall, and must therefore be reached by
entries from other sides; that the team tracks in the Budweiser
yard at Ninth and Pestalozzi are enclosed by a high iron fence with
swinging gates, and likewise that the 25 or more ladder tracks in
the yards of the keg department, beginning at Second and Pestalozzi
and running west to Broadway, are ended some 25 feet below the
level of Broadway by an embankment which is reenforced by a
concrete or stone wall topped with an iron fence. As access to the
latter department from the Broadway side is thus absolutely
impracticable, entrance must be effected from Pestalozzi Street or
between buildings of the Brewery on the Arsenal Street side between
Second and Broadway.
