BALTIMORE & OHIO RAILROAD CO. ET AL. v. UNITED STATES ET AL.
No. 312
SUPREME COURT OF THE UNITED STATES
Argued January 14, 15, 1936. Reargued March 3, 4, 1936. Decided May 18, 1936.
298 U.S. 349
Mr. Edward M. Reidy, with whom Solicitor General Biggs, Assistant Attorney General Dickinson, and Messrs. Daniel W. Knowlton and Elmer B. Collins were on the brief, for the United States and Interstate Commerce Commission, appellees.
Mr. Frank W. Gwathmey, with whom Messrs. Charles Clark and James F. Wright were on the brief, for Atlantic Coast Line R. Co. et al., appellees.
MR. JUSTICE BUTLER delivered the opinion of the Court.
This is a suit in equity1 brought by appellants against the United States to set aside and permanently to enjoin the enforcement of an order of the Interstate Commerce Commission based on its report made July 3, 1933, and modified in accordance with its report of January 8, 1934.2 The commission, July 10, 1928, had prescribed rates on citrus fruit3 from places of production in Florida to points in Official Classification Territory.4 The order
The history and structure of the joint rates shed light on questions to be decided. June 25, 1908, the commission found the rates, called “gathering rates,” from places of shipment in Florida to junctions in the northern part of that State reasonable, but that the charges for transportation from the junctions to the north were unreason-
In 1915 the commission allowed the carriers in official territory a general rate increase of five per cent.,11 and in 1917 granted an additional 15 per cent.12 These increases were applicable generally to interterritorial hauls. The specifics for northern lines were not advanced. In 1918, while the carriers were under federal control, the director general raised rates 25 per cent. The divisions to the southern and northern lines were increased by that ratio. In 1920, after the railroads were returned to their owners, the commission granted to carriers in the southern group a general rate increase of 25 per cent. and to those in the eastern group, which included the northern lines here involved, an advance of 40 per cent. It also authorized charges for interterritorial hauls to be raised by 33 1/3%.13 While that was enough to increase the southern carriers’ shares by 25 per cent. and those of the northern lines by 40 per cent. in harmony with the respective rate increases, each group of carriers received divisions raised by 33 1/3 per cent. The northern lines emphasize the fact that if their divisions had kept step with rates in that territory they would have been increased four times, whereas in fact their divisions did not share at all in either of the first two advances and only partially in the fourth, i.e., 33 1/2 instead of 40 per cent.
The divisions were not satisfactory to either group of carriers. November 22, 1930, the Atlantic Coast Line and other southern carriers filed their complaint15 requesting the commission to condemn the divisions of citrus fruit rates to trunk line and New England territories, then being received by them, as a violation of the requirements of § 1 (4), to prescribe just, reasonable and equitable divisions in accordance with § 15 (6), and to require adjustment and refund to be made by northern lines in respect of transportation subsequent to the complaint. January 3, 1931, the commission instituted a general investigation16 in respect of divisions of joint interterritorial rates between official and southern territory. April 20, 1931, the northern lines filed a cross-complaint. To prevent duplication, the general investigation, so far as it concerned divisions of rates on citrus fruit in central territory, was set for hearing on the same record as the complaint of the southern lines in respect
There was before the commission no question as to the validity of the joint rates. There was no claim that they were not sufficient to cover “out-of-pocket costs,” i. e., the amount by which performance of the service covered by the rates caused operating expenses and taxes to be higher than otherwise they would have been. Nor was it suggested that they were confiscatory, i. e., not sufficient to cover operating expenses and taxes justly apportionable to the traffic plus an amount reasonably sufficient in the circumstances to constitute just compensation for the use of the carriers’ property in that service. The division of presumably reasonable rates was the only problem before the commission. Neither complaint alleged that existing divisions were not more than sufficient to cover the out-of-pocket costs or that they were confiscatory.
The commission was required to decide whether, in respect of the joint rates, the carriers had discharged the duties imposed upon them by § 1 (4), i. e., “to establish just, reasonable, and equitable divisions thereof as between the carriers participating therein which shall not unduly prefer or prejudice any of such participating carriers.” The prescribing of divisions is a legislative function.18 Exertion of that power by the commission is conditioned upon its finding after a full hearing that
But this does not imply that, without regard to amount, the carriers are bound to accept prescribed divisions. Congress is without power, directly or through the commission, to require them to serve the public at rates that are confiscatory. When made in accordance with the Act, the commission‘s orders prescribing divisions are the equivalent of Acts of Congress requiring the carriers to serve for the amounts specified. Taken, as they must be, in connection with the duties to the public imposed by law upon the carriers, they command service and for that purpose expropriate the use of carriers’ property. If when made the prescribed divisions are or later shall become less than just compensation, the carriers may not be required to serve therefor.20 And, if after appropriate effort they fail to obtain divisions of non-confiscatory joint rates that do constitute just compensation for their services including the use of their properties,
1. Appellants maintain that the order is arbitrary and in excess of statutory power “because the commission erroneously subordinated all matters, which under § 15 (6) ... it is required to consider to the element of southern lines’ supposed ‘financial need.‘”
In substance, Congress by that paragraph authorizes the commission to take into account all that is relevant to the ascertainment of fair divisions. While presumed
The report shows that the commission received much evidence bearing upon the standards set by § 15 (6) to govern it in making the divisions. Appellants’ claim that the order rests exclusively upon the southern lines’ financial needs is negatived by the record. Many other facts were shown to have been presented and considered. There is no requirement that the commission specify the weight given to any item of evidence or fact or disclose mental operations by which its decisions are reached.23 Useful precision in respect of either would be impossible. And it would be futile upon the record to attempt defi-
2. Appellants also maintain that the order is in excess of power granted by the Act because, as they assert, the commission considered rates of return from the carriers’ entire operations on all their railroad property instead of fair return from transportation of citrus fruit on the use fairly attributable to that service.
More specifically, the substance of their claim is that the commission transgressed or disregarded the clause of § 15 (6) which requires that it “shall give due consideration, among other things, to ... the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation....” Their contention assumes and depends upon a construction of the quoted clause that would limit consideration of the return to services covered by the divisions under consideration and prohibit taking into account returns from all service. But that is not the meaning of the clause. The language, “property held for and used in the service of transportation,” is broad enough to include all carrier property. It requires no discussion to demonstrate that § 15 (6) authorizes the commission to take into account and give due weight to revenues from all transportation service, the operating expenses and taxes chargeable to the same and the amounts available as compensation for the use of all carrier property. And unquestionably the paragraph also empowers the commission to take into account the revenues, expenses, taxes and returns attributable to the service covered by the divisions under consideration. The record shows that the commission received and considered evidence in relation to both these matters of fact.
For a haul of 600 miles the northern factor is 87 and the southern 161. The latter is 85 per cent. higher than the former. The average hauls are about 825 miles in the south and 375 miles in the north. For these distances the factors are 194 for the south and 60 for the north, or 0.235 per mile for the longer haul in the south and 0.160 per mile for the shorter haul in the north. The advantage per mile is 47 per cent. for the south. Taking into consideration the respective lengths of haul and the fact that divisions, like rates, should decrease per mile as the length of haul increases, this 47 per cent. checks well within the 85 per cent. in the first test.
For the average southern haul of 825 miles the southern factor is 94 per cent. of the corresponding first-class rate, whereas the northern factor is 62.5 per cent. Yet the southern class rates average more than 30 per cent. higher than the eastern class rates, and the commission has several times found that this difference is not fully justified by transportation conditions.
Transportation conditions in Florida are less favorable than in the south generally; but a Florida arbitrary is added to the rate. It is deducted before proration and added to the southern division of the balance of the joint rate. Gathering expense is high but so is delivery expense at destination. The commission was obliged to lean heavily on history and on the fact that, while both sets of carriers are badly off financially, the southern lines appear to be worse off than the northern. Historical
The wide difference of opinion among the members may suggest doubt as to some basic findings of fact, but it gives no support to appellants’ claim that the commission acted arbitrarily or in excess of powers granted by the Act. The legal effect of the challenged report and order is the same as if supported by all members of the commission.24 Although it may be plain that, if considered without regard to the facts other than relative transportation and costs of the service, the divisions would seem extremely favorable to the southern lines, the commission‘s findings based on evidence and its determination as to the significance of pertinent facts found are conclusive. Appellants’ contention cannot be sustained.
3. Before taking up appellants’ claim of confiscation, some preliminary questions require consideration.
At the trial the United States and commission moved that no evidence be received other than that contained in the record before the commission. The court denied the motion. Counsel for the United States and commission do not here claim that the ruling was erroneous. But it has been suggested that the trial court should not have received evidence other than that introduced before the commission; that it was not permitted to make findings but was bound to accept those of the commission if supported by evidence. Decisions in lower federal courts
There is no statute that can be held to limit as suggested trial of an issue of confiscation. No question as to compensation in the constitutional sense was raised by the complaints to the commission. The issues there concerned only the fairness of divisions. Prior to the taking effect of the order, appellants filed a petition for rehearing in which they claimed that its enforcement would confiscate their property; they then made substantially the same contentions as they make in this suit and sought opportunity to support them by evidence in order to obtain the commission‘s findings of fact and decision upon the question of confiscation. But the commission denied their application. That denial of hearing amounted to a command of the commission that, notwithstanding their petition to it invoking constitutional protection, appellants must make the specified adjustment involving the payment of enormous sums and use their property to serve the public for the compensation specified in the order. As the carriers’ application to the commission for just, reasonable and equitable divisions under § 15 (6) raised no question of confiscation, its findings in the report may not be construed as addressed to that issue.
In Chicago, M. & St. P. Ry. Co. v. Minnesota, 134 U. S. 418, this court held repugnant to the due process clause of the Fourteenth Amendment a Minnesota statute construed to provide that rates prescribed by the state commission shall be final and conclusive as to what are equal and reasonable charges and that as to reasonableness there can be no judicial inquiry. The court said (p. 458): “The question of the reasonableness of a rate of charge for transportation by a railroad company, involving as it does the element of reasonableness both as regards the company and as regards the public, is eminently a question for judicial investigation, requiring due process of law for its determination. If the company is deprived of the power of charging reasonable rates for the use of its property, and such deprivation takes place in the absence of an investigation by judicial machinery, it is deprived of the lawful use of its property, and thus,
In Monongahela Navigation Co. v. United States, 148 U. S. 312, this court held repugnant to the Fifth Amendment an Act of Congress purporting to exclude an element of value. It said (p. 327): “By this legislation, Congress seems to have assumed the right to determine what shall be the measure of compensation. But this is a judicial and not a legislative question. The legislature may determine what private property is needed for public purposes—that is a question of a political and legislative character; but when the taking has been ordered, then the question of compensation is judicial. It does not rest with the public, taking the property, through Congress or the legislature, its representative, to say what compensation shall be paid, or even what shall be the rule of compensation. The Constitution has declared that just compensation shall be paid, and the ascertainment of that is a judicial inquiry.”
In Reagan v. Farmers’ Loan & Trust Co., 154 U. S. 362, a fully considered case presenting the question whether a circuit court of the United States had power to enjoin enforcement of confiscatory state-made railroad rates, this court, upon an abundance of authority found in the earlier decisions, held that it had. The opinion declares (p. 399): “These cases all support the proposition that while it is not the province of the courts to enter upon the merely administrative duty of framing a tariff of rates for carriage, it is within the scope of judicial power and a part of judicial duty to restrain anything which, in the form of a regulation of rates, operates to deny to the owners of property invested in the business of transportation that equal protection which is the constitutional right of all owners of other property. There is nothing
Seaboard Air Line v. United States, 261 U. S. 299, was a suit to recover just compensation for expropriated land. A jury found value at the time of the taking. The district court entered judgment for that amount with interest from the date of taking. The Circuit Court of Appeals held the owner not entitled to interest. Here its judgment was reversed and that of the district court affirmed. We said (p. 306): “The Constitution safeguards the right [to just compensation] and § 10 of the Lever Act directs payment. The rule above referred to, that in the absence of agreement to pay or statute allowing it [Jud. Code, § 177;
United States v. New River Collieries Co., 262 U. S. 341, involved the question of pay for requisitioned coal. We said (pp. 343-4): “The ascertainment of compensation is a judicial function, and no power exists in any other department of the government to declare what the compensation shall be, or to prescribe any binding rule in that regard.” See Davis v. Newton Coal Co., 267 U. S. 292, 301. Phelps v. United States, 274 U. S. 341.
In West v. C. & P. Tel. Co., 295 U. S. 662, called upon to decide whether the order of a state commission prescribing charges for telephone service was confiscatory, we said (p. 671): “When the property itself is taken by the exertion of the power of eminent domain, just compensation is its value at the time of the taking. So, where by legislation prescribing rates or charges the use of the property is taken, just compensation assured by these constitutional provisions is a reasonable rate of return upon that value.”
St. Joseph Stock Yards Co. v. United States, ante, p. 38, presented the question whether an order of the Secretary of Agriculture prescribing rates for stockyards services was confiscatory. The case was submitted to the district court upon the evidence contained in the record before the Secretary. This court was called on to decide whether the district court was required to weigh the evidence. We answered affirmatively. We said (p. 51): “When the legislature acts directly, its action is subject to judicial scrutiny and determination in order to prevent the transgression of these [constitutional] limits of power. The legislature cannot preclude that scrutiny or determination by any declaration
The just compensation clause may not be evaded or impaired by any form of legislation. Against the objection of the owner of private property taken for public use, the Congress may not directly or through any legislative agency finally determine the amount that is safeguarded to him by that clause. If as to the value of his property the owner accepts legislative or administrative determinations or challenges them merely upon the ground that they were not made in accordance with statutes governing a subordinate agency, no constitutional question arises. But, when he appropriately invokes the just compensation clause, he is entitled to a judicial determination of the amount. The due process clause assures a full hearing before the court or other tribunal empowered to perform the judicial function
involved. That includes the right to introduce evidence28 and have judicial findings based upon it.295. Although not suggested by appellees, it is here urged that the lower court was without power to consider the question whether the order is confiscatory. Grounds taken are that appellants did not seasonably raise that issue or present their evidence upon it to the commission, and that in respect of divisions, as distinguished from the joint rates to be divided, confiscation can never be the ultimate issue.
But neither group of carriers claimed before the commission or here asserts that the joint rates are not sufficient to permit nonconfiscatory divisions that are just, reasonable and equitable within the meaning of
They could not foresee that confiscatory restitution would be required or that confiscatory divisions would be prescribed; they were not bound, in advance of the commission‘s findings and report, to set up a fear of transgression of their constitutional rights. Presumably the commission would keep within the law. The boundaries of the power conferred upon it by
Appellees do not claim that appellants were required to or could have raised the question of confiscation upon the proposed report of the examiners. That report is not a part of the record. At the trial appellants offered it in evidence. The commission objected to it on the ground that it is “a mere recommendation of an employee of the commission to the commission.” The court sustained the objection. The report of the commission
No Act of Congress requires carriers, in advance of suit to set aside divisions or other orders, to petition the commission for rehearing, repeal or modification. Nor has Congress attempted to limit the time within which the carrier may sue to enjoin enforcement of an order of the commission prescribing rates or divisions. That is so for the reason, among others, that divisions valid when made may later become confiscatory.32 For example, the evidence as to the cost of service introduced before the commission and at the trial was based on operations in 1929. The appellants were not given and could not obtain a hearing before the commission upon the question of confiscation. Their failure earlier to invoke constitutional protection does not bar this suit. That they diligently sought relief from the commission is shown in the latter‘s brief here in which, justifying or explaining its denial of the second petition for rehearing, it says: “When the Commission denied the second petition, it already had before it and had considered the proffered evidence in support of the claim of confiscation that appellants desired it to consider, as well as the entire record of the previous hearings, much of the testimony in which consisted of cost calculations and other statistical data offered by the appellants.” Appellants conformed to practice appropriate and desirable as indicated
Appellants appropriately invoked judicial power to obtain constitutional protection against the commission‘s order. The district court rightly held them entitled to introduce evidence in addition to that contained in the record before the commission, and rightly proceeded, upon consideration of all the evidence, to make findings and, upon the basis of the facts that it found, to decide upon the constitutional question.
6. As to proof of confiscation. By this appeal we are required to analyze findings of the commission and of the court, in so far as they bear upon the question of confiscation, and, to the extent that may be found necessary, to review the evidence and to decide whether appellants have proved, with the degree of certainty required in cases such as this, that the enforcement of the commission‘s order will operate to deprive them of their property without due process of law or to take its use for the service of the public without just compensation in contravention of the
The commission having refused to consider the question of confiscation, we are deprived of the benefits of its analysis of the evidence, findings of fact and inferences based upon them that necessarily would have been involved in its determination of the question whether the prescribed divisions are, and for a reasonable time in the
To warrant reversal in so far as the order directs adjustment and refund, it must clearly appear from the evidence before us that its enforcement, in respect of the period involved, would leave appellants less than enough to cover operating expenses, taxes and just compensation for the use of their property fairly attributable to the service covered by the divisions. To warrant reversal of the decree in other respects, the evidence must show that the prescribed divisions were and in the future will be confiscatory.
Appellees’ suggestion that the challenged report and order come to this court upon concurrent findings of the commission and district court is without force. Denial without more of the second petition for rehearing involved no finding of fact. It was merely a refusal to pass upon the question of confiscation then for the first time presented. And, as the commission in prescribing divisions acted legislatively and not judicially, the rule that where two courts have reached the same conclusion on a question of fact it will be accepted here unless clearly erroneous, does not apply.
Appellants’ method of calculation.—For each carrier figure system costs per car mile thus: Ascertain from its reports to the commission operating expenses and taxes; apportion total between freight and passenger according to formula prescribed by the commission; from freight expense deduct cost of car repairs, depreciation and retirements; divide remainder by total freight car miles and to the quotient add two cents per mile paid for use and maintenance of refrigerator cars used to haul citrus fruit. The result is taken to represent the cost per car mile of transportation of that freight. It depends upon the assumption that citrus fruit car mile cost is at least as high as the average of system car mile cost.
The shipping season of 1928-29 was the test period. There were hauled 17,324 carloads by the Atlantic Coast Line and Seaboard Air Line from Florida points to Richmond, Virginia; and by the Richmond, Fredericksburg & Potomac to Potomac Yards; whence the Pennsylvania hauled the larger part, and the Baltimore & Ohio the rest, to destinations. Comparison of expenses determined by application of the estimated citrus fruit car mile cost with revenues calculated on the basis of the challenged divisions follows:
| Revenues | Expenses | Deficit | |
|---|---|---|---|
| R., F. & P. | $411,051.64 | $412,311.20 | $1,259.56 |
| Pennsylvania | 748,339.98 | 813,918.88 | 65,578.90 |
| B. & O. | 87,845.90 | 74,477.23 | *13,368.67 |
* Surplus.
In the same season 4,662 carloads of citrus fruit from Florida were hauled by southern carriers to other gateways named in the order and by northern lines thence to destinations in central territory. Calculations on the same basis indicate revenues $285,064.02, estimated expenses $232,456.87, surplus $52,607.15. Appellants say of this surplus $39,644.92 is accounted for by 1,253 cars, hauled a short distance by northern carriers, affected by minimum provisions of the order, and that the cost assigned to them is understated.
Comparisons of divisions.—Divisions of revenues from 29,221 cars hauled to destination in Trunk Line and New
Appellants claim that the cost per citrus fruit car mile is greater than the average of all. To support that contention they emphasize evidence introduced to support these facts: Refrigerator cars used are very much heavier than the cars used to haul dead freight; additional inspection service is required, hauling over road and handling in terminals is more expeditious than that given to ordinary cars. There are required at destination relatively very expensive produce terminals. Diversions and reconsignments are more frequent. Expedited service requires, at intermediate and final terminals, more employees for inspection, repairing, and keeping records than otherwise would be necessary, extra engines and crews are required promptly to classify, to switch to ice houses, to effect reconsignments, to make up trains and to haul them. The relatively high percentage of empty car movement makes it hard to balance movement in both directions and frequently requires operation of locomotives over the road without cars.
Appellants cite a statement in the report of the commission to the effect that in general the evidence indicates that citrus fruit like other perishable traffic is
They draw comparisons indicating 10.56 cents to be the Baltimore & Ohio system average cost per car mile as against 14.61 cents on the operating division over part of which most of its citrus fruit is hauled; correspondingly 10.95 cents appears to be the Pennsylvania system average as against 11.59 cents for its Eastern Region and New York Zone over a part of which most of its citrus fruit is hauled.34 Basing the statement on mere opinion of an expert, they say that on hauls over the Pennsylvania line through Baltimore and Philadelphia to New York the transportation expense alone was 14.2 cents per car mile.
They claim that tested by the car mile study the prescribed divisions failed by substantial margins to afford any return to the Richmond, Fredericksburg & Potomac or to the Pennsylvania, and that they afforded a return to the Baltimore & Ohio of only 4.42 per cent.
Appellants maintain that the principles underlying their estimates of cost are sound and that the assumptions
Appellees call attention to the commission‘s rejection of the average unit costs as a method of approximating cost of handling a single commodity.38 They seek to discredit appellants’ method by showing it would prove confiscatory the divisions that for a long time they had accepted. Their evidence tends to show: Much of the operating expenses chargeable to maintenance of way, maintenance of equipment and transportation is not affected by volume of traffic, and therefore the greater the
The burden on appellants, heavy though it is, does not require them to prove with arithmetical accuracy the cost of the transportation covered by the challenged divisions or the value of the property used to perform it; or the proportion attributable to that service. It is enough, if the evidence preponderating in their favor reasonably warrants findings sufficient to support the decree sought. Many issues as to which demonstrable accuracy is impossible have to be decided by the courts. In ascertaining cost of transportation of one out of many commodities hauled by railroads it is impossible to attain precision. Mere lack of it is not ground for objection either to the evidence offered or the facts which it tends to prove.40
We may say at once that no substantial weight is to be given to appellants’ comparison of divisions prescribed for northern carriers with those given the southern lines. As shown above, the commission acting under
The commission‘s statement to the effect that citrus fruit transportation service “is undoubtedly more expensive than the ordinary run of freight” is not entitled to any weight, for it does not appear that the statement referred to cost per car mile. For aught that appears, some other unit may have been meant. And, as they lack disclosed definite bases of established fact, no weight may be given to cited opinions of appellants’ expert witnesses to the effect that citrus fruit car mile cost is higher than system average.
Nor is there any force in appellees’ suggestion to the effect that the evidence on which appellants seek to prove the prescribed divisions confiscatory would similarly condemn divisions that they accepted for a long time prior to the reduction of the joint rates November 9, 1928. As shown above, carriers advantageously to themselves and the public may and sometimes do apply rates and divisions that are lower than they could be compelled by law to accept.
The test period 1928-29 ended more than one year before the first complaint to the commission, four years before its final decision and the commencement of this suit, five years before entry of the decree appealed from, and six years before submission to this court. In that period there intervened a profound business depression out of which there has been some progress.41 The evidence fails to show that the relation of citrus fruit car mile cost to the system average has remained the same as appellants claim it was in the test period. Appellants should have brought forward evidence and estimates based on operations subsequent to the complaint, No
Appellants’ evidence was addressed primarily to the question whether as to citrus fruit traffic moving through the Richmond gateway the prescribed divisions were confiscatory. In determining whether as to any carrier that evidence was sufficient, appellants’ estimated citrus fruit car mile cost is of prime importance. A slight variation in that figure is sufficient to change the balance from one side of the account to the other; to change surplus revenue to deficit. If since the order took effect that cost has been, or in the immediate future will be, substantially less than the contemporaneous system car mile cost, appellants’ proof is not sufficient to show confiscation. It is very difficult to attain the high degree of certainty in respect of this vital factor that is obviously necessary to make dependable proof.
Operating expenses are incurred in innumerable services few of which, if any, are the same in respect of car mile cost as is the transportation of citrus fruit here in question. There are many elements that affect system average that have no relation to citrus fruit car mile costs. It would seem that, without specific knowledge of details of operation affecting cost during representative periods, no dependable opinion could be reached as to the cost relationship on which the appellants’ case depends.
The facts that they brought forward to show that citrus fruit car mile cost is at least as high as the system average undoubtedly tend in a general way to aid that contention. But they lack useful certainty. Appellees’ criticisms above referred to are substantial and at least sufficient reasonably to warn against acceptance of ap
We conclude that the evidence is not sufficient to establish with requisite certainty what has been or will be the cost of the service covered by the prescribed divisions and that the district court rightly dismissed the suit.
Affirmed.
MR. JUSTICE BRANDEIS, concurring.
I agree that the suit is without merit and that the District Court was right in dismissing the bill. Two objections to the order of the Commission, unsubstantial but otherwise proper subjects for judicial review, were disposed of briefly below and have rightly received like treatment here. It is the third objection—the claim of “confiscation” to which the attention of both courts has been directed. That claim imposed upon the lower court six days of hearings. It imposed upon this Court a reargument and a huge record. With the briefs, it weighs avoirdupois 67 pounds. The narrative statement of the testimony occupies 1237 pages of the printed record in this Court; the briefs fill 546 pages. There are, besides, 428 exhibits. In my opinion, the applicable rules of procedure forbade the lower court from passing upon the
First. The question on which I differ from the Court is this: Where, in a suit to set aside a divisions-order, under the
While the Commission may, at any time, modify or supersede an order, no court has power to set an order aside except for inherent error or procedural irregularity. To hold that this divisions-order may be set aside because “confiscation” will result if it is applied in connection with the rate-order not under review, and not objected to, would make of that claim a paramount and prerogative right hitherto unknown to the law.
Second. The treatment of the suit as a “confiscation case” has led to serious misconceptions. The term “con
In a proceeding to fix “just, reasonable, and equitable divisions,” “confiscation” can never be an ultimate issue. For, as a matter of substantive law, the fact that the share allotted to one is not compensatory is without legal significance. The Commission‘s task is solely to make a fair division of existing rates. A division, although fair, may conceivably fail to give any of the connecting carriers adequate compensation for the service rendered, because the through rate—the thing to be divided—is itself inadequate. Or conceivably, the through rate may be so generous that all participants will receive compensatory divisions, although, as between themselves, the division itself is unfair. The fact that the share assigned to one is non-compensatory will be of evidential value if accompanied by evidence that some other carrier is receiving better treatment. But, unless it appears that some other carrier was so favored, the non-compensatory character of the division would be entirely immaterial. And even when relevant, may be of little or no weight because of other considerations.
At best, the non-compensatory character of the share, if proved, would be only one of the many subsidiary
“the efficiency with which the carriers concerned are operated, the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation, and the importance to the public of the transportation services of such carriers; and also whether any particular participating carrier is an originating, intermediate, or delivering line, and any other fact or circumstance which would ordinarily, without regard to the mileage haul, entitle one carrier to a greater or less proportion than another carrier of the joint rate, fare or charge.”
Thus, a division may be “just, reasonable and equitable,” although it allots to one carrier a non-compensatory share and to another carrier a compensatory share, because it was inefficiency in operation by the former which rendered its share non-compensatory. Or, the seemingly preferential treatment of the latter might be justified by the fact that it was the originating carrier, and hence entitled by established transportation practice to the larger share of the through rate.
If inadequacy of a prescribed through rate is the reason why the share of one of the participating carriers is non-compensatory it has ample remedies under the Interstate Commerce Act and the Constitution. It may, at any time, apply to the Commission for an increase of the through rate; and if the increase is improperly denied, a remedy is available in the courts by a “confiscation” suit. That remedy would be open although the prescribed rate had been acquiesced in; for every rate order is subject to revision at any time upon application to the Commission. A divisions-order, likewise, is always subject to revision;
Third. The through rates which the Commission was requested to divide in the proceeding under review are those on citrus fruit from Florida to points north of the Potomac and Ohio Rivers. These had been prescribed by order entered July 10, 1928, Railroad Commissioners of Florida v. Aberdeen & Rockfish R. Co., 144 I. C. C. 603; and the level of rates thereby prescribed was acquiesced in. That order did not deal with divisions. The divisions governing the Florida citrus fruit traffic had, for many years prior to July 10, 1928, been fixed by agreement. After entry of that order (which reduced the through rates on the average about 67 cents a ton), there developed a controversy as to the divisions. Being unable to agree, all the carriers—the southern lines by original complaint, the northern lines by cross-complaint—applied to the Commission, under
The proceedings which resulted in the entry of the divisions order, and the efforts to have it set aside, were as follows:
(a) The southern lines filed their complaint with the Commission on November 22, 1930. The cross-complaint
(b) The northern lines presented a petition requesting that the hearing be reopened for reconsideration on the evidence already introduced and supplemental data culled from statistical reports in the Commission‘s files, which it was agreed should be treated as evidence. On October 9, 1933, the proceedings were reopened as requested to reconsider, upon the evidence originally submitted and that then added, whether there had been an error of judgment in fixing the divisions. There was no claim made in this petition for a rehearing that the divisions which had been prescribed by the order of July 3, 1933, were confiscatory. The Commission discussed in a supplemental report of 13 pages the errors assigned; concluded that the objections were unfounded; and on January 8, 1934, affirmed the divisions prescribed. There was no reference in the supplemental report to the subject of confiscation. 198 I. C. C. 375-387.
(c) On April 27, 1934, the northern carriers presented a second petition for a rehearing; and with it presented, as additional evidence, “cost studies.” There was no suggestion that these were, in a legal sense, newly discovered evidence; nor was there a contention that they were evidence of a change in economic or traffic conditions which required that the Commission‘s conclusion should be changed. The main claim was, as in the first petition for rehearing, that the Commission erred in its judgment. But the second petition contained a claim that the divisions awarded to the northern lines were confiscatory. On May 14, 1934, this second petition was denied without opinion.
(d) On May 25, 1934, the northern carriers brought this suit in the federal court for Eastern Virginia to set aside the order of July 3, 1933. The bill sought relief on five grounds. Prominent among them was the claim that this division was confiscatory. At the hearing before the three judges, which began on September 17, 1934, and occupied six days, the plaintiffs introduced in evidence a transcript of the evidence before the Commission on which the order complained of had been entered and confirmed, consisting of 2,054 pages of oral testimony and 358 exhibits. Over objections of the defendants the plaintiffs were permitted to introduce additional oral evidence, of which the transcript fills 1,066 pages; also, 70 exhibits. On December 31, 1934, the court entered a final decree dismissing the bill. Its unanimous opinion disposes briefly of the objections other than confiscation. To that subject nearly all of the 18-page opinion is devoted. 9 F. Supp. 181-199.
(e) The application for appeal to this Court was filed February 26, 1935. Of the grounds for relief set forth in the bill, only three were insisted on at the original argument, namely: (1) That the Commission subordinated all matters which under
Fourth. Clearly, the Commission did not err either in a ruling of law or a finding of fact as to “confiscation“; since it made no ruling or finding on that subject. Was it guilty of an abuse of discretion in refusing to pass upon it? Congress conferred upon the Commission power to grant or deny, in its discretion, a petition for rehearing of a decision.
The refusal to grant the second petition for a rehearing was not an abuse of discretion. Federal appellate courts will not in civil cases, upon review of the judgment of the trial court, consider any objection not seasonably presented below; and an objection first presented in a petition for rehearing which has been denied is not seasonably presented unless in connection with the denial that objection was specifically passed upon. This rule is of general application. It governs the appellate court‘s action whether the objection raises a constitutional ques
The case at bar is not like Atchison, T. & S. F. Ry. v. United States, 284 U.S. 248, where the order was set aside because the Commission refused to reopen the case and hear additional evidence. That offered was of changed conditions; important, because every rate-order is subject to revision upon changes in conditions, and the change which had occurred since the hearings was catastrophic. To refuse to reopen the hearing under those circumstances was held to be an abuse of discretion. In the case at bar no controlling change of condition was alleged. There was not even a claim of newly discovered evidence. The Atchison case rests upon its exceptional facts. It is apparently the only instance in which this Court has interfered with the exercise of the Commission‘s discretion in granting, or refusing, to reopen a hearing. Compare United States v. Northern Pacific Ry., 288 U.S. 490, 492 et seq.; Illinois Comm‘n v. United States, 292 U.S. 474, 480-481; St. Joseph Stock Yards Co. v. United States, ante, p. 38.
Fifth. Thus, the divisions-order is free of inherent error. Paragraph 4 of
“When made in accordance with the Act, the commission‘s orders prescribing divisions are the equivalent of Acts of Congress requiring the carriers to serve for the amounts
specified. Taken, as they must be, in connection with the duties to the public imposed by law upon the carriers, they command service and for that purpose expropriate the use of carriers’ property. If when made the prescribed divisions are or later shall become less than just compensation, the carriers may not be required to serve therefor. And, if after appropriate effort they fail to obtain divisions that do constitute just compensation for their services including the use of their properties, the carriers may by suit in equity have the order prescribing, or requiring to be kept in force, the challenged divisions adjudged void and its enforcement permanently enjoined.”
That additional statement is, in my opinion, without support in any act of Congress. No law gives to a divisions-order any greater, or other, effect than that expressed in its words. The divisions-order, which alone is here under review, contains no command that the “carriers serve for the amounts specified.” Nor does it “command service” at all. It merely directs
“that said complainants, cross-complainants, defendants and respondents, according as they participate in the transportation be, and they are hereby notified and required to cease and desist, on and after November 1, 1933, and thereafter to abstain from asking, demanding, collecting or receiving, divisions of said joint rates upon other bases than those prescribed.”
The only command to serve is contained in the rate-order not here under review.
The Court states further: “Prescribing of divisions is a legislative function.” It would be more accurate to say that the task imposed by
Prominent among determinations judicial in their nature are those under
In such judicial or administrative determinations it might conceivably be contended that expenditures ordered would so reduce net-earnings as to render non-compensatory some existing prescribed rates. But the contention would not convert the proceeding into a rate-case. If the claim that by reason of the expenditure ordered, prescribed rates would cease to be compensatory proved to be well-founded, the appropriate remedy would be to seek a modification of the rate-order which had thus become confiscatory, not to set aside the ad
Sixth. The question discussed is not one of merely procedural importance. To permit enquiry into the question of confiscation under the procedure here pursued might affect seriously the substantive rights of other participating carriers. As the divisions-order merely allots the share of each in existing rates, any addition to the share given to one must necessarily be taken from the share of others. For aught that appears, the share of the southern carriers received, or insisted upon, is no more than a compensatory return. If the Court had in this case concluded that the share allotted to the northern carriers was non-compensatory, and pursuant to its action their share were increased, the result might be to make the share of the southern carriers non-compensatory.
In passing upon the issue of confiscation the Court discussed the question, whether the trial court properly admitted evidence which had not been introduced before the Commission; and decided that the evidence was admissible. I do not agree with the Court‘s conclusion on that subject. But as the issue of “confiscation” was, in my opinion, not properly before the trial court, I refrain from discussing the question what evidence would have been admissible if that issue had been. See Crowell v. Benson, 285 U.S. 22 and St. Joseph Stock Yards Co. v. United States, supra.
MR. JUSTICE STONE, MR. JUSTICE ROBERTS and MR. JUSTICE CARDOZO join in this opinion.
Notes
“Official territory is subdivided into three subterritories, which have been recognized in rate making for many years. These are New England, lying east of the eastern boundary of New York; trunk-line territory, which extends westward from there to a line drawn through Buffalo and Salamanca, N. Y., Warren, Oil City, Pittsburgh, and Washington, Pa., Wheeling, Parkersburg, Charleston and Gauley, W. Va., these cities being usually referred to as the ‘western termini’ of the trunk lines; and Central Freight Association territory, referred to herein as central territory, lying west of that line.” Eastern Class Rate Investigation, 164 I. C. C. 314, 322.
| Scale of southern factors | Scale of northern factors |
|---|---|
| 600 miles and less.......: 161 | 240 miles and less...... 44 |
| 620 miles and over 600... 164 | 260 miles and over 240... 46 |
| 640 miles and over 620... 167 | 280 miles and over 260... 49 |
| 660 miles and over 640... 170 | 300 miles and over 280... 51 |
| 680 miles and over 660... 173 | 325 miles and over 300... 54 |
| 700 miles and over 680... 176 | 350 miles and over 325... 57 |
| 720 miles and over 700... 179 | 375 miles and over 350... 60 |
| 740 miles and over 720... 182 | 400 miles and over 375... 63 |
| 760 miles and over 740... 185 | 425 miles and over 400... 66 |
| 780 miles and over 760... 188 | 450 miles and over 425... 69 |
| 800 miles and over 780... 191 | 475 miles and over 450... 72 |
| 825 miles and over 800... 194 | 500 miles and over 475... 75 |
| 850 miles and over 825:.. 197 | 525 miles and over 500... 78 |
| 875 miles and over 850... 200 | 550 miles and over 525... 81 |
| 900 miles and over 875... 203 | 575 miles and over 550... 84 |
| 925 miles and over 900... 206 | 600 miles and over 575... 87 |
| 950 miles and over 925... 209 | 625 miles and over 600... 90 |
| 975 miles and over 950... 212 | 650 miles and over 625... 93 |
| 1,000 miles and over 975... 215 | 675 miles and over 650... 96 |
| 700 miles and over 675... 99 |
The order directed carriers to adjust divisions in accordance with the basis above indicated on shipments which moved subsequent to November 22, 1930.