St. Louis & O'Fallon Railway Co. v. United States

Ill of the Constitution, for this section applies only constitutional courts. Even if the proceeding not such a or case controversy, the Court oí Customs Appeals, being legislative may court, be invested with jurisdic- it, tion of as is done 316. by § prohibition

Of course, writ does lie not to a court is proceeding within the limits of its jurisdiction, Customs Appeals Court appears doing this instance. Prohibition denied. LOUIS & O’FALLON COMPANY ST. RAILWAY al. et v. UNITED STATES et al. v. ST. LOUIS & O’FALLON STATES et UNITED al. RAILWAY COMPANY et al. Argued January and 132.

Nos. 131 1929. Decided May Wood, Frederick H. with Kirby Daniel N. Messrs. Craven, Kelley, Léslie Robert H. whom Messrs. Nagel brief, Charles were on the railway for appellant companies. Wickershcm, Special Assistant George

Mr. W. Sargent General Attorney with whom Attorney General, brief, was for the United on the States. E. Messrs. Fisher, with whom Oliver L.

Mr. Walter brief, on the for the were J. Lehman Sweet and Roland Commission. Commerce Interstáte argu- oral Richberg participated R. Donald

Mr.' curiae, in of The amicus behalf as a brief, and filed ment Railroads, American Valuation dn Conference National of Court. leave by special Rockwood filed and Fletcher Dorety F. G.

Messrs. of the Great Northern. curiae, behalf amici brief, leave of Court. special Company, Railway McReynolds opinion of the Mr. Justice delivered Court.

, of final decree from the appeals "are cross These judges sitting Missouri, Eastern Court, District —in —three Commerce,Commission,or- an Interstate annul a suit do which 15, 1927, directed St. Louis February and der, dated place in a reserve fund Company Railway O’Fallon excess income the ypars of its determined for. one-half 1923 half 1921, (that 1922 and of months), (ten 1920 railway income for operating the net by which sum six' cent of the ascer- per exceeded years of those each service); devoted to public of property value tained one-half the remaining the Commission with pay four months after termi- cent interest per six beginning 1, 1921; 1923 year, e., May 1922, i. and 1924. of the nation 15a, to the Interstate Commerce Act added Section paragraphs. contains nineteen Act, . Transportation here, 1, 2, and 8 important are specially Of those follow:— copied margin;* “ this section, For the of (4) purposes aggregate such shall of the the carriers be determined property value . *“ (1) employed.] 15a defines the terms Section [This just prescribe (2) power In the. its and reasonable exercise initiate, modify, adjust shall rates the Commission establish or such (or so that carriers as a a whole in rates whole as each of such rate groups may or territories as the Commission from time to time designate) management will, honest, under efficient and economical may time and as often as by the Commission from time to ütili'ze the may The Commission results necessary. be Act, in its under section of this so far investigation 19a as available, and shall due give deemed it consideration' recognized to all the elements of value the law of the expenditures for way, reasonable maintenance of structures and aggregate railway equipment, operating earn an annual net income smay nearly be, upon aggregate a to a fair return equal,- railway property of such carriers held for and value used transportation: Provided, That the the service Commission shall adjust modify particular any or have reasonable latitude to rate may unjust unreasonable, prescribe find or to be and to dif country. rates for sections of the ferent different “(3) The Commission shall from time to time determine and public percentage aggregate property con- make what such thereon, percentage stitutes a fair return and such shall be uniform groups designated by may for all rate or territories which give making Commission.' In such determination it due con- shall sideration, among transportation needs things, other to the reentry necessity (under honest, and the efficient and economical management existing transportation facilities) enlarging such provide people of the United with facilities in order to States Provided, during years transportation: That the two be- adequate re- ginning 1, 1920, March Commission shall as such take fair aggregate equal per value, may, turn a stun centum of such but to 5%. exceeding discretion, in its add thereto a sum not one-half one per aggregate provision in or centum such value to make whole part ac- equipment, which, for or in betterments improvements, cording system prescribed by Commission', are accounting to the chargeable capital to account. regulation

“(5) (without impossible Inasmuch as it is and control in the interest of the commerce of the considered as a United States whole) upon competitive to establish uniform rates traffic which will engaged which adequately sustain all carriers are in such traffic indispensable they and the communities which are to to which render enabling transportation without some of such carriers the service operating railway substantially income un- to receive a net and upon railway reasonably in fair return the value of their excess of a ’ property transportation, used in the service of it' is held for and any which receives an income hereby declared that carrier such so give prop- and shall to the rate-making purposes, land consid- only of the carriers account erty investment in it is entitled estab- under such law eration which Whenever rate-making purposes. pur- values for lishing railway 19a of this Act the value of the section suant to held for and used service of any carrier property the value so finally ascertained, has been transportation the Commission to be by be deemed ascertained shall determining aggre- for the such purpose thereof value gate value.’' section, any under the of this carrier

“(6) If, provisions a income any year railway operating receives for net per railway property excess of 6 centum of the Value of the used it in by transportation, held for and the service of placed of such excess shall be a reserve fund one-half re-, and maintained and by carrier, such established one-half thereof within the first maining shall, four months for which following period computa- the close of the such by recoverable Commis- made, paid is tion establishing a maintaining the purpose sion for fund hereinafter contingent railroad as described. general part return, excess, shall hold such of the as of a fair here- in excess pay prescribed, for, to,'the as' trustee and shall it United inafter States. op “(7) purpose paying stocks, or For the dividends interest its securities, roads, may other or rent for leased carrier draw bonds or fund established and maintained it under the from the reserve railway its operating section to the extent net provisions of this any year per sum centum equal is less than a of the income for railway property held for and used the service (6); provided paragraph but such transportation, determined any purpose. upon for other fund shall not be drawn and maintained “(8) fund be accumulated reserve need not Such per centum of the its beyond equal sum value of any carrier provided, when such fund as hérein railway property determined portion of its excess income and maintained the accumulated so paragraph (6) under may be permitted to retain the carrier is for-any purpose.” lawful used For the purposes of .this paragraph the value of the rail- way property and net railway operating income of a group of carriers which the Commission finds are under common management control and and are operated as single system, computed shall be for the system as a whole irrespective separate ownership and account- ing returns of system. various In parts such case any which has accepted provisions carrier section of this amendatory provisions Act the of this paragraph shall not be income applicable any to the for period September 1, 1920. The of such prior Commission, railway shall property be determined by the in the provided manner (4).” paragraph

After an investigation instituted under 15a, May 14; § 1924, for the purpose determining incomes received by and Railway St. Louis O’Fallon Company (The' O’Falldh) Railway and-Manufacturers’ (The Company Manufac- turers’), asserted parts one system, years 1920-1923, (1) Although the stock Commission found: by the corporations mostly Adolphus of both was owned same, were the Estate their officers principal Busch common were not under control operated carriers they management system within single paragraph as operat- The had received no (2) Manufacturers’ excess of The ing (3) property income. The value O’Fallon’s public (ten months) $856,- in 1920 devoted service was $997,- 065; 1922,.$978,874; $875,360;'in 236; years each during operat- it received those net income cent stated ing exceeding per upon six valuation. recapture

The above-described order followed. under here the Judicial properly cause is Code, . (U. February 13, 1925, amended Act of S. Title C., 28, 345)—§ A Supreme Sec. 238. direct review Court an or or interlocutory judgment, final decree of a district following provided had is so may be where

court not otherwise: . .' or Acts and parts Acts of .. 'An Act making appropriations So much of “(4) other year 1913, and for purposes/ . . . for the fiscal relates to 22, 1913, as of October .the review approved judgments and final and decrees suits interlocutory orders of the Interstate or set suspend, enforce, to aside other than for the of payment Commission Commerce - n . ...” money. 22, (38 219, 220) Stat. 1913, October trans- Act of The jurisdiction granted to District Courts ferred (36 18, 1910, Act of Stat. by 539); June Court Commerce by this for review Court causes embraced provided of the Commerce Court jurisdiction in- The therein. cluded— enforcement, for the

“-First. All otherwise than- cases of a and collection forfeiture or adjudication penalty of,criminal punishment, any order of infliction or Commission other than for Commerce Interstate money. payment brought enjoin, annul, set or aside, Cases

Second. .whole, any order of part the Interstate or suspend ...” Commerce Commission. 238, to all (4), applies those

Paragraph § causes for- Court and cognizable by reviewable merly Commerce ” than for the payment other of money words here. The 1910, First, clause Act quoted from above taken were jurisdiction the trial there, they delimit court’s and, here any inhibit review cause formerly' do not They Court. the Commerce Moreover, or- cognizable not merely payment was consideration der under below to set proceeding was money; aside, not enforce it. Chicago, Commission v. Burling- Railroad

Wisconsin and Dayton-Goose R. S. Co., & R. U. ton Quincy 263 U. S. States, The United Railway Co. v. Creek Act, Transportation of purpose general out the point 15a. § validity uphold thirty with switching road Manufacturers’ The The Louis, Missouri. O’Fallon— within St. miles track all main line, -miles of nine road —has coal-carrying Terminal Railroad The with this connects Illinois, and are made deliveries Through the latter Louis. at East St. which are on some of Louis, in St. sundry points “ the rail- distance between The Manufacturers’ line. of Manufac- the railroad the O’Fallon and of the road rail 12 all communication and miles, is turers’ about the of over tracks properties effected the two between Mississippi a the Terminal, bridge over including the and the District Court Both the Commission River.” two were failed to show these roads the record held that operated and management common control under of We meaning paragraph the a single system'within their conclusion. accept O’Fallon to in- The pay

The Commission directed 6% of excess recaptured its ascertained on the one-half terest four from beginning income months railway operating net (§ year during 6). of the excess the end the which accrued rightly as the carrier The District Court ruled that made any fide bona denial under excess circumstances suffi- no contest, a interest should cient have been im- justify time final' any prior order. Not until posed .for if what, the carrier know anything, then could should pay. Court

Also, rightly rejected think the District we were earnings recapturable not unless claim excess general the Commission had fixed level and until upon fair return yield aggregate intended to rates whole, either as or in some property value carrier . course, or territorial prescribed group Congress, rate final ex require realized that valuations prodigious would effort; of time and but the penditure language concern indicates that ing recapture prompt expected. action was application Practical paragraphs does not nec essarily depend upon prior compliance with paragraphs 2 and 3. The Act should out be construed so as to carry legislative purpose. proviso paragraph pre scribing action to taken years two during beginning March clause of 1, 1920, paragraph and the 6 excepting prior income of certain roads to September 1, hardly are with compatible this claim carrier. §4, Paragraph 15a, directs that values determining railway for property purposes of recapture Com give mission shall due consideration to all the -elements recognized by law of the land for rate-ma and shall king give purposes, property investment only'that account carriers consideration un der such law it is entitled establishing values rate-making purposes.” This is an express command; has carrier right clear to demand compliance United ex therewith. States rel. Kansas City Southern Railway Co. v. Interstate Commerce Commission, U. S. 178. “ The of recognized value by elements of the l$w ” for rate-making land purposes have been pointed out many by times this Court. Smyth Ames, v. 169 U. S. 466; Co., Wilcox v. Consolidated Gas U. S. 19; Min Cases, nesota Rate 230 U. 352; S. Southwestern Bell Teler phone Co. v. Public Commission, Service 262 U. S. 276; Water Works & Improvement Co. v. Public Bluefield Service Commission, 262 U. 679; S. McCardle v. Indian apolis Co., Water Among U. S. 400. them is the pres ent cost of construction or reproduction.

Thirty years Smyth ago, v. Ames (546): announced “We hold, however, that the basis all calculations as to the reasonableness of rates to be charged áby cor- sanc- legislative under highway maintaining poration being used by property fair of the value tion must be the as- And order to of the public. convenience it for the construction, original cost value, the that certain improvements, in permanent expended amount stock, the pres- of its bonds market amount and construction, original cost with compared ent as par- under property of the capacity earning probable required the sum statute, and prescribed rates ticular for considera- are all matters expenses operating to meet may just be weight such tion, given and are to be not may there say not We do each case. right estimating the value regarded other matters to be to ask is is entitled company What the the property. employs which it fair return the value upon hand, other On the convenience. what public exacted no more be is that public is entitled demand services highway than the from it for the use of a public worth.” reasonably rendered it are In Telephone Southwestern Bell Co. v. Public Service (287), impossible we said: “It Commission, supra amount, upon proper- a fair return ascertain what will considera- giving ties without public devoted to service at the time supplies, etc., tion to the cost of labor, intelligent An honest and forecast investigation is made. all the made a view of probable upon future values If im- highly circumstances, relevant is essential. Wholly disregarded costs is present element of portant Estimates for to- impossible. a forecast becomes such today.” cannot ignore prices morrow been ad- consistently has The doctrine above stated hered to this Court. long argumenta Commission is report rela observations general devoted

tive. Much of it is valuations; making and purpose tive method to the approved to doctrine objections urged are many us asserted. stoutly view is of another and the superiority It carefully stating any refrains from that consideration whatever was in given reproduction or present costs the estimating value of carrier’s dis- property.' the Four senting declare reproduction Commissioners that costs were, not considered; and the report itself confirms their majority view. the a like understanding Two avow the pursued. course The following the dissenting opinion

. from of Commis- others, sioner Hall, concurred three de- accurately scribes action the of the Commission:— “ In order to determine the value the O’Fallon prop- erty to carrier during recapture pe- devoted service years 10 months in the riods, year 1922, and the 1921, we start a valuation with or inventory date 1923, June 1919. The units on 30, existence that are date known. Original cost of entire property can not be As man-made ascertained. to the units we estimate them their cost condition on reproducing that date to the units doing apply prior so installed to June 1914, unit 30, prices representing con- 1914, fairly level 5 or price preceding years. sistent for the like To 30, prior'to installed after June units, 1914, 30, June a sum we the same but add 1919, apply prices, represent- on units during, period. increases those that ing-price For from the third June down to period; recap- each we'abandon and turn to ture estimate date, recorded net 'cost of additions less retirements. On this composite, made of estimated for two up' periods and ascer- period, tained net .cost for the third the majority base recapture conclusion as to value date at man-made goes items. Land its current value as at measured of neighboring lands. summarizing clearly Without other all processes, majority it will report, stated in be observed rate-making value at arrived for successive recapture year example rests upon periods, lands; market of of property costs other installed since June 30, 1919; unit of prices enhanced al- by lowancé for during increased cost of installed units June and, for the to 30, 1914-1919; prior units installed June 30, 1914, major far the constituting part prop- erty, prices any unit 1914 without enhancement what- to major part ever. As this of the carrier’s de- property voted to carrier in 1923 no is purposes given consideration to then or to prices obtaining costs increase therein since 1914.” ' In the exercise of its function this Court has proper declared the law of the land valuations for concerning The Commission- rate-making disregarded purposes. thereby discharge rule and failed to

approved has Unfortunately, imposed Congress. definite duty timely heed was denied the admonition proper not to The function of this commission is minority —“ as an Con- agency as an arbiter but act economics^ developed to facts the law the land apply gress, by Congress juris- to our in matters committed record diction.” divided this:

The on which the Commission question property the valué'of railroad to ascertain seeking When consideration cur- give must récapture purposes, The to be accorded weight costs? reproduction, or rent, are doubt there matter before us. No is not the thereto ultimate value which many, railroads some, perhaps necessary for repro- the sum far below placed be should values shall be has Congress But directed duction. all with along costs present consideration .upon fixed must obeyed. mandate be and this facts; pertinent other Court below to de- unnecessary by the It deemed was° statutory obeyed the Commission, whether termine order permitted since the touching valuations direction- nega- great enough an income to retain The O’Fallon With we actual confiscation. suggestion this any tive cannot agree. Whether the Commission acted directed If Congress question was the fundamental presented. not, it did taken; beyond authority action thé being granted, was make only power any recap- invalid. The ture order arose from the statute. judgment of the court below must reversed. A

decree will be entered here challenged annulling order.

Reversed. no took in the consideration Mr. part Justice Butler or determination of this cause. Brandeis,

Mr. Justice dissenting. question The main for consideration is that of statutory Act, construction. By-Transportation 1920, February 28, 91, c. 41 § Stat. 15a, 456, 488, Congress delegated to the Interstate Commerce Commission the to duty estab- “ lish and maintain rates which yield will a fair return the upon aggregate value of railway property” the United States. By paragraph it thereof, directs “ that value the ascertaining Commission shall give consideration all due the elements of value recognized law of the land for rate-making purposes ”; “ give shall to the property investment only account under such law is consideration entitled to which values for establishing rate-making purposes.” re- Commission, port which accompanies order “ In challenged, declares: the methods of valuation which proceeding have followed in this we we have endeavored heed to this direction contained in give paragraph [that .” Excess Income St. Louis . . and O’Fallon 4] Speaking I. C. C. for Ry. Co., the dissenting “ Hall If Mr. Commissioner said: members, the law needs change made it let those who it. Our change, duty tois apply (pp. 63, 64.) law as it stands.” And Com- Mr. “If missioner Aitchison anticipate grave added: we re- sults will responsibility will be if follow, fully met our we 'suggest Congress, under our statutory powers to recommend new legislation to that the enact- body, making ment of a rule under the commerce clause rate 64.) will no unfavorable effects.” (p. which have such reference either to the 15a no specific Section makes investment, or or to property, prudent cost of the original price the then existing or to reproduction cost, to current of the Act (a) provisions Section 19 level. valuation (the § refers, directs Commssion to which 1913), 15a “ piecd detail as to each things, other among to report, date, . cost cost original . property, less depre cost of new, reproduction reproduction and elements of value.” values, also ciation other 15a entry §of and before enactment- After the. Bell Tele it was held Southwestern challenged,

order Commission, U. S. v. Public phone Co. Service the rate-base law, under on a-state arising a cáse to earn constitutionally entitled utility a public of value the used property is the then actual return a fair not the cost or the business, original the and useful in The Gov enterprise. invested the prudently amount cost is admissible reproduction that current concedes ernment value under 15a. present § to show evidence as nor Congress, now that neither the carrier concedes The reproduction cost the measure made current law, common on which the The divided question of-value. Commission require the Commission act Congress Did when is this:- in all cases and to all give, respect 15a to ing § under to controlling, if not effect evidence es property, some, cost of reproduction? the estimated current tablishing to the the intend leave Commission Congress Or did determine, passing upon as other con- authority to troverted fact, issues of what if it weight, give should any, to that evidence?

The O’Fallon contends, other among things, that the or der is confiscatory. The claim is that the order to the left company a return of 4.35 only per cent upon the value as certained in accordance with the rule declared the South western Bell case and Indianapolis McCardle v. Water 272 U. If Co., S. 400. this were true, would be imma terial Congress whether purported authorize course £he pursued by the Commission. But the fact is thát, in each of the recapture the so periods, earnings were as to large leave, making required after payments the Com per about 8 on mission, cent what the carrier was alleged the fair value property. O’Fallon argues that, of required since statute the order it to hold as of reserve one-half over 6 per it is de cent,, excess prived, of that This property. require is not true. The ment that'one-half earnings excess cent per shall be retained the carrier until equals the reserve 5 per value of the railroad cent does not deprive any property. the carrier of It merely the use regulates Compare City thereof. Kansas Southern Ry. Co. v. States, U. United S. 453. The provision is one de to secure financial and is similar signed stability; to those sinking prescribing other funds, depreciation, appro Congress regulate rail priate may accounts.1 the use of l so, road ensure as well as property physica financial safety Both are essential to the and the stability. service Ry. Co. public. Dayton-Goose In Creek v. United Report reporting 3288, Report 1 See Committee S. Senate No. “The p. Congress, Company 66th 1st Session: fund reserve may upon railway drawn carrier its whenever annual per operating property. below income falls cent property carrier; is, course, fund the absolute The reserve requiring is purpose in it to be established and maintained and the stability of the carrier and enable render give to the credit it to to engaged.” in it is efficiently public service which more in 456, were States, 486, S. where facts this U. at bar, the consti those the case respect identical with If the fail the order was sustained. validity tutional costs of current reproduction the evidence give ure to to error, O’Fallon was it is for it- 'claimed effect have been rights carrier’s constitutional not because the to Commission failed observe invaded, but because the amounts determining for by Congress rule prescribed and reserved. recaptured to be that, is in since claim of the O’Fallon substance

The recapture higher during peri were construction costs because be set aside, should ods than the order existing structural that the the Commission failed to find before acquired had been equipment property then.2 been Juste more had 1914 was fworth than find pres to shown, will be undertook, The Commission direc to follow the and, doing, ent both actual value so the rule declared apply and to Congress tion of Court there Bell case. It that this Southwestern true is element cost an that current reconstruction declared directed the Com Congress value; actual to all elements give mission consideration due making land rate law of the recognized by the But, the Act the Commission required while purposes.” nor Congress neither this evidence, all such to consider give to evidence reconstruction required it Court weight. left un They mechanical effect artificial or cost to all relevant evidence such duty give trammeled its judgment, in its evidence inher as, force probative The Commission concluded that ently re possesses. reproduction the differences to the evidence spect c.osts Southwestern Bell case and that at bar between the were property equip complaint all the structural concerns nearly acquired But,.as all of this had ment before June July 1, limited 1914, the discussion is been installed before property before that date. acquired

492 such as to lead to different results the two cases. It “

did so mainly because in the administration of the valu- ation and recapture provisions,” ascertainment of value affected aby variety is vast that either considerations not enter into, do or are less easily perceived in, problems incident the regulation to public local utilities.” (p. In 27.) my opinion the conclusions the Commission áre well founded. To make 'clear the reasons, requires consideration the function of the Commission apply- 15a and ing §' with which it is problems confronted. First. The Commission is a factfinding body. The question give it must confessedly relevant whether facts solely adjective evidential.effect one of law. Stat utes have sometimes limited weight or effect evi They dence. have often created presumptions rebuttable and have shifted the burden of no But instance proof. been found fact-finding under our body -where law has been required give has an evidence effect which does not inherently Proof possess. implies persuasion. To the human mind compel respect to infer any logic -which observation and is not tells us true interferes with the reasoning body. It process fact-finding departure would be a from the unbroken to re practice an artificial quire legal conviction where no real conviction exi sts.3

An proba the Commission of arbitrary disregard would, course, effect of ground tive evidence set bp order, aside an would an abuse ting as this of discretion. aside because entered have been set Orders without 4 fact had matters of been evidence; or because considered 3 English (seventh Compare edition) 70; Best on Evidence §§ 1. Manley v. 279 U. S. Georgia, R., Union See Commission v. Interstate Commerce R. Pacific & 541, 547; Commission v. Louisville U. S. Interstate Commerce 92; Ry. v. United 227 U. S. Florida East Nashville R. Coast R., 167; England 261 U. S. U. S. States, Divisions Case, New the Commis- because record;5 not in or were which and circumstances consideration facts from excluded sion or because it took considered;6 to have been ought influence legally which could not facts consideration into found which this no case has been But judgment.7 its ground on the that the Com- an order has set aside Court to evidence which seemed to effect give failed mission ground on the or force, be of probative Court to Commission an drawn from the evidence inference had the Court to be erroneous.8 deemed On conclusion or 5 Nashville Commission Louisville & Interstate Commerce v. See Chicago Case, 264 Junction 93; 258, U. S. 263. R., 227 U. S. 88, R. 6 Ry. Commission, v. Interstate Commerce Texas & Pac. 162 See Ry., Commission v. Alabama Midland 197; Interstate Commerce U. S. Commission Northern Interstate Commerce 144; v. 168 U. S. Pacific Ry., 538. S. 216 U. 7 States, Line United East 167, 187; 234 U. Florida Coast v. S. See States, 257 U. S. 247. R. R. Co. United Central v. weigh Interstate Commerce Commission in

8 Allegederrors drawing urged inferences therefrom have been or ing evidence many consistently cases. This Court has reversal in held grounds for Commission’s proper as to such are not matters decisions that the Ry. g., Cincinnati, &c. Interstate judicial e. v. subject review. See for Commission, 154; Illinois 142, Central R. 206 U. S. Commerce R. Commission, Com 441; Interstate 206 v. InterstateCommerce U. S. R., Illinois Central Los Commission v. R. 452, 470; 215 merce U. S. Switching River Angeles Case, 234 U. S. United States v. New 294; States, United Co., Chemical Co. v. 533; 265 U. S. 271 U. S. Western Virginian Ry. States, 658; Chicago, v. United R. I. 268; 272 U. S. Ry. States, 29; Assigned Cases, United Car 274 & Pac. U. S. v. 274 excerpts opinions following from recent succinctly S. 564. U. in the express position Court’s matter: —“The courts will not scope of the Commission made within review determinations .the judgment powers findings its or their its substitute and conclu “ River Co., 265 533, sions.” United v. New States U. S. To 542. weight beyond province.” consider the the evidence our West States, Co. v. ern Chemical United U. S. 271. “This Court correctness reasoning, no concern of the Commission’s has with conclusions, alleged the soundness of its with the with or inconsist- of the Commission contrary, findings involving or evidence have been treated with effect appreciation a tribunal due to those “informed the deference ” ” “ deal by law to with an experience appointed Central Interstate Co. v. subject. Illinois R. R. intricate U. Commission, Unless, there Commerce S. 441, Commission; only not to con fore, Congress required ascertaining of reconstruction cost values sider evidence also to making under but 15a, give, for rate purposes § ¿ases in, all some respect property, weight in all even if cost, of enhanced reconstruction to evidence inherently persuasive, was not the Commission evidence ex to determine for itself to what clearly was authorized given evidence; if should be to the tent, any, weight Court, be disturbed unless it findings its should not an abuse of that there was appears discretion. may While cost be said reproduction

Second. current in the property, element the present to.be an of. vajué considered in the properly that it is evidence to be sense Co. v. value,” Standard Oil Southern ascertainment Co., cost it is clear that current U. S. Pacific the cost not original than does reproduction higher necessarily value. present tend a Often prove higher in- without higher reconstruction is any the fact cost knowledge on It common present fluence values. current office many buildings the values and market the War have residences to World failed prior ..constructed to reflect the increased costs recent greatly building new of like years, although buildings the df charac- need being ter demonstrated volume of con- large was Virginian findings ency proceedings with made in other before it.” Ry. States, v. United 658, if the S. 665-666. But determina 272 U. support in the evidence, of the commission finds substantial tion weigh nor the wisdom courts will not evidence consider of the States, Chicago, Ry. I. & v. United R. Pac. commission’s action.” 29, 274 U. S. 33-34. built railroads Many level. higher price at the

struction as much as worth War have never been World before cost com high construction because cost, original their traf and limited conditions adverse operating with bined rea despite earning, their all prevented have at times fic The cost. original fair return on the rates, sonable Milwaukee and Chicago, of the extension Puget Sound in branches, and Many example.9 notable St. Paul is a have since railroad, scrapped been lines of deed whole au miles of railroad was 2,439 Abandonment 1920. 1 of Interstate Com §of under paragraph thorized fol- in the three 1925; and and merce Act between & Puget extension of the St. Sound Milwaukee Cjhicago, completed $257,000,000. Railway in 1909 at a cost of about was Paul expenses. operating during years, than earned, fifteen little more It “ only operating about one-half 1925, net income was As late as its Investigation Chicago, Mil per on this investment.” cent 1. Ry. Co., 617, 131 I. C. C. 621 The Paul waukee & St. . proceeding court in the foreclosure upset price cash fixed Ry., Guaranty Chicago, P. & St. $42,500,000. was Trust Co. v. M. (2d) 434, 15 F. 443. example existing striking discrepancy of the often between

Another price reproduction cost is to be found in value, market or actual Railroad, Detroit, case of the Toledo & Ironton which Mr. Ford purchased $6,800,000. physical said in 1920 for to have a .It was $16,000,000 $20,000,000. Railway Age, value of between Yol. 69.1, p. 132. application 8, 1929,

In an order on March granting, Chattanooga Ten- Nashville, Ry. Louis to abandon its Middle & St. operation branch, nessee & Alabama which had been in more than thirty ap- the Interstate Commerce Commission said: “The years, plicant project poorly was conceived doomed contends to failure from the outset.” 150 I. C. C. obviously reproduction cost of does

“-But not measure value in purchaser, pay property. would the sense of what a Let Pittsburgh upon put owners of the old Wabash Terminal their road prove of this assertion.” the market truth Homer D. Vander- Railway Age, 68,2, p. blue 1920—Vol. 1105.

496 had, 2,010 more.10 These properties miles

lowing years either be for transportation, become valueless main, competitive available or because ceased to be cause'traffic of. establishment transportation precluded .of means 11 would no one con Obviously, rail rates. remunerative was before abandonment just their tend that actual it would them or what what it to construct originally cost have, to reconstruct them. then cost history legislative §of 15a its Third. terms intended by that Congress para- preclude assumption to evidence respect 4 Commission in deny graph commonly discretion of reconstruction cost the exercised if an weight, any, given shall be determining what 1920, more prominent In no fact was fact. evidential than Congress of the the mind public prevailing far than that living greater cost was when neither in existing But, railroads were built.12 Trans- Act, any nor Committee 1920, report, is there portation suggestion even a Commission would required 10 Operation, Motor Bus and Motor Truck. 140 I. C. C. 685, 727. Commission, Reports 1921, p. 19; 1922, p. 219; Annual See 1925, 263; 237; 1924, 253; p. 1926, p. 286; 1927, 1923, p. p. p. 294; p. 1928, 298. 11 competition has to some been a factor Motor extent in such arising 31, For instances since 1927, abandonments. October see . Co., R. Potato Creek R. Abandonment 482; I. C. C. 481; 131 Co., Rapids Pennsylvania 548; R. R. Grand 547, 131 I. C. C. Ry. Co., Spokane, 345; Indiana Coeur d’Alene & Palouse I. C. 138 C. Co., Traction, Ry. Inc., Illinois 723; C. 138 I. 145 I. 20; C. C. C. Maryland Ry. Co., Ry. 232; Co., Southern C. C. Western 145 I. 145 Ry. Co., Francisco 355; St. Louis-San C. 145 I. C. 379, 383; C. C. I. Marquette Ry. Co., 560, 561; Chicago, Rock Island Pere C. C. 145 I. Ry Co., Co., 698, 699; & Southern 145 I. C. C. 145 Pacific Pacific C. . City Ry. Co., Hill Compare I. 707 I. C. C. C. 159. living cost Senator Cummins stated that was then from per prewar, prices. Cong. Rec., I, cent p. 80 to above Part Hearings, p. See, also, Vol. 148, II, Part 277; Senate Committee I, pp. Hearings, House Committee Part Vol. 376-377.

497 give any to that fact for effect values ascertaining rate If in making under 15a. it had purposes been § the of Congress tention the compel Commission tó increase rate making price for because the level- purposes values risen, it have such a naturally incorporated had would in the On the other the Com paragraph. hand, direction was, and the that mittee debates show the reports opinion held that quite the actual values were less than commonly investment account on the property appearing the books of the and the made carriers;13 proposal the railroads that investment account be accepted the measure of value was resisted as excessive.14 The being property “

13 I great many said Senator Cummins think there are a instances larger in which the any possible investment accounts are than value property.” Cong. Rec., p. that could 1, be attributed 59 Part “ My judgment is, however, 126. own proper that of the , aggregate ties is -less than accounts . pp. .the investment .” other-expressions opinion 135-136. For to the same effect see pp. 224, 228, aggregate 905. Senator Cummins stated' that 127.) $19,000,000,000. (p. the investment accounts was about . Compare p. Esch, Cong. 59 Rec., 4, also 130 Mr. p. See Part says (124 39): The Commission I. C. In C. this connection it significant legislation that when the 15a is a § congressional was under consideration part, there was offered in be proposed of the carriers bill in which their recorded invest half ment, equipment in road and was made the sole element the de worthy rate base. It is also of note that when termination legislation representative was under such consideration a pn September response question, of this commission congressional publicly informed that he knew no committee ' assumption warrant for an the commission will -base the value ” wholly present property part prices.’ or in on equipment The road and investment as stated on the books of City, (of Kansas) Kansas R. Mexico and Orient R. Co. as of 30, 1919, $22,190,935.- The was final June valuation the Com $6,453,528. as of was $1,064,782 mission that date After that date expended betterments, making for was additions a total value $7,518,310. City, (with Kansas Mexico & Orient of Texas expenditures additions) $6,854,522. City, valued at Kansas was of doll 19 billions in 1920 was about account

investment ap railroads, reproduction then cost ars.15 The over cost, was to estimated actual figures index plying re Congress, after is inconceivable It billions.16 in excessive, account as investment jecting property on Commission mandatory § to make tended 15a. a valua give which would the consideration elements The rejected. insertion tion double that which-had been “ shall give the Commission § 15a the provision only carriers investment account property to the the it is entitled to that consideration which under law ” the purposes making for rate establishing values show that measures value of other rejection proposed restrictions the impose not to. upon intended Congress Commission.17 discretion the on did intend to return Congress provide existing should be only slightly railroad which more property enjoyed during than had been the six preced- that which To the then required price have level be ing years. § values to be fixed under 15a would reflected have the property in a rate-base of double resulted investment of living For the cost was then (cid:127)account of the carriers. fair return prewar prices. prescribed double about Co., 217; City, C. Kansas Mexico & R. 135 I. C. Orient R. Mexico & properties, These with 339, 344. Reorganization, C. C. I. Orient 145 by the Com $29,045,457 Were valued aggregate book an added, road in Mexico and, miles of $14,372,832 with 320 mission at R. Topeka and Santa R. Atchison, purchased were Fe Ry. Co., City, Mexico & Orient Kansas $14,507,500. See Control of C. C. 145 I. 350. 15 note 13. See Ry. Co., 124 I. C. C. Louis and O’Fallon Income St. Excess 3, ex to this effect was Contemporary opinion of the railroads before the Interstate hearings held in the pressed in their behalf (Hearings, In re: 22-24, 1920 on March § Commission Commerce Act, 134). p. parte 71, Transportation Ex to such a- rate applied base would produced have more the average than double net from earnings operation the several properties during years three preceding control; more than double the amount which the federal carriers under agreed accept Act, Federal Control March c. 21, § 40-Stat. 1918, 25, 1, 451, as fair compen- sation for the of their use property; more than double guarantee provided by Transportation 209, Act, § for the six Inonths’ period after- the surrender of control. The sum had railroads thus earned net those equalled 5.2 on years six cent per property investment as carried on their account, books. making

In for a fair provision return, main pur was not to increase the pose earnings of capital already railroads, invested but attract the new capital improvement needed for or extension of facilities.18 This to be accomplished by raising was the rate of return from (Senate to 5.5 per cent cent Reports, Vol. No. per 5.2. Sess.): 1st Cong., 66th “ The the is adopted basis Committee three-tenths of than the higher cent basis of the test per period [the preceding June years 1917]; three" and assuming, though not that value of the conceding the property is equal property to the investment it will yield accounts, railways the a net operating all income of $54,000,000 excess income the test period. the There were two considerations which the majority of the led committee report firmly

18 “The writer of this is convinced the that when operation assumed of the railways they were, Government taken whole, all earning they permitted but, as a that earn; should be to earnings in the inevitable distribution of these among the various railway railways companies, per carried cent of earning they were not, by economy traffic so little that could any or good management, sustain themselves.” Reports, Senate No. Cong., Vol. 66th 1st A rate Sess. base which then reflected the price yielded $700, increase levels over 1914 would have about 000,000 period more than the income of test to only believe that increase this is not warranted but necessary:

“First. being are railways returned their owners when everything and-abnormal; is unsettled when there everywhere.. is Just what distrust suspicion rate of will to finance them- return enable carriers conditions with not, certainty selves under such can be It was that some increase felt, therefore, determined. justifiable. over the was prewar period “ commodities, As all kinds of with compared Second. than it years less valuable was a few money ago, is much ,fair that the returns from only seem to be and would be reasonably should advanced.” railway investments bill was to accomplish which the The means : thus the report end are desired stated “ of return basis the value By upon prescribing First: in- give such assurance to railway property, look them to upon incline with rail- will favor vestors re- moderate say, making securities; way, for the carriers. to establish credit certain reasonably turn fairly return certain to secure making In Second: charge than would other- capital a lower public for the .-necessary. wise any which under In some requiring carriers,

“Third: than a fair return, earn more will of rates body given and in so this using to the Government excess pay or credit can be fur- facilities transportation excess help thus to maintain carriers, weaker to the nished transportation.” system general or return increase of the rate of increase Either would have measured that return is served on which base levels. The price adop- higher to adjust compensation to return, in the as the the increase Congress tion purchasing decreased the for' compensating means of in- it assumption that dollar, precludes of the power that lessened pur- reflect the valuation should' tended

501 choo’sing the former Con- By explicitly chasing power. For to the latter.19 have allowed rejected gress implicitly adjusting in have gone beyond would increase both an made this increase a increased and have costs earnings the rail- for unwarranted allowing profits pretext mere which led to the of the passage The proceedings roads. no such Congress intended result. make clear it Act in Congress enacting The purpose declared Fourth. adequate an national sys 15a the maintenance of was § railway capable tem of providing transportation, to the at lowest con public service cost possible best ..the full to the owners. justice private Following with sistent consistently by this Court pursued applying the. course the Interstate Act, Commerce Texas provisions other Ry. Commission, Co. Interstate Commerce & v. Pacific Case, 197, 211, 219; England New Divisions 162 U. S. Dayton-Goose United Ry. Creek Co. v. 184, 189-190; S.U. States, 456, 478, 263 U. S. Commission construed in the of fhé'declared light purpose Congress 15a § knowl factors involved. From wide economic its practical experience actual conditions its edge of enhanced making, it concluded that effect to rate give 27.) costs would defeat that reproduction purpose (p. . for could making purposes knew that the value rate It sum on a fair could be more than that return not by legal earnings and that were rates; be earned justified Kellogg in debate on the bill Senator 5% by.’the argument per cent return as used same the Committee in reporting “Again the bill: cent per must be remembered that 5% years today equal per ago. great is not cent five inflation 5% currency general and the rise all commodities have made a dol very purchasing power.” Cong. 1, p. much less Rec., lar Part given The same of increased as a 224. costs had been recognition justification return liberal authorized the Federal Control years Act. 1916 and 1917, two of the three taken as a basis for measuring return, prosperous history were the most Cong. II, p. Part Rec., railroads. See

502 higher of rates

limited both the prohibition commercial legal than traffic prohibition would bear and the It a and knew that higher just rates than reasonable. are fluctuating general rate-base in level of changes with It knew industry and commerce. prices would imperil fluctuating not, rate-base would that of a adoption dp in rail investors justice to those claimed, prewar as is lessened suffering were from road who securities se great majority railroad .the dollar, since guar term bonds or the long are represented curities return; a fixed lines which bear of leased anteed stocks gain through the could only and that stockholders higher rate base. satisfy do required greater earnings rail system national adequate that an recognized It provided cannot be owned, as it-is ways, long privately so maintained,, inflow of capital; a continuous without “ can capital only an inflow of such obviously, also, that already invested which capital treatment be assured investment,” 30); and encourage (p. further will invite and v. United said in Dayton-Goose Ry. Creek Co. that as was “ in a 456, 481: investment business States, By 263 U. S. recognize the owner must service dedicated public to. the business, private with investment that as compared', dividends but high speculative or expect he either cannot fair or only reasonable limits him that his obligation 2 ." profit 0 report House, submitting to the said: Mr. conference Esch/ra upon they can something fixed which definite and Investors want give stability, stand of section provisions reckon. Cong. will-encourage Rec., . . .” 59 I-trust, investment ard (p. 32): “In points out other p. 3269. The Commission Part $18,000,000,000] property at there words, assuming a [valued static 6.3 billions gain 23.4 billions would have been a loss again gain 1922, and a billions in 1921, a further of 6.8 loss oc and ‘losses’ would have huge ‘profits’ These billions in 1923. property public used in the change in railroad without curred change speculative derived other than the theoretical service price shifting general levels.” from be a fall time that there would The conviction fluctuating rate-base As a held. generally was price level and commerce industry directly imperil would thus during levels relatively high price at investments made thé increase would tend War;21 the and since World to service adequate money required supply cost of new the investment, discourage such and would the public; in- have not Congress could Commission concluded by value or it measure the tended to require rate-base result con- produce since this would reproduction cost, con- confirming its And as to its trary purpose. declared the with showed that, 15a the Commission struction § basis for as the which it had accepted stable rate-base to establish Act, Congress the aim of administering It had been system an national adequate attained. inclu- “During periodT920-1926, out that: pointed 4by increased property investment railroad sive, money was part A this of dollars. substantial billions much of it was obtained income, but derived from The market for railroad secur- securities. the sale of new has act, 1920, transportation passage ities since interest rates trend of general and the steadily improved in gen- railroads The credit of the downward. has been 33.) .” (p. . . eral now excellent. confirm the construction considerations Other

Fifth. for rate to the “value phrase Commission given In § 15a. condemnation as used making purposes,” he has lost recovers what the owner proceedings, 21 1926, inclusive,'there was years, 1920 to an seven “During the in additions and betterments net investment approximate .new paid prices, These were for at then of 4 billions. construction current Assuming above, present prices. many far above, cases aE per average price in «unit of 25 decline level an has since been there reproduction would current cost doctrine under cent, a valuation upon investment. The effect additional biEion of that wipe out one during period 1920 to entirely largely constructed any or raEroad 32.) imagined.” (p. may be 1926 v. Commerce Boston Chamber

taking property, de must be and such loss Boston, 195; S.U. 189, which the uses to reference to merely not termined with uses to to the reference but with applied, it is at the time Patterson, 98 v. Boom Co. adapted.” is plainly R. Louisville & Nashville R. Compare S. 408. 403, U. But the 435. 197 U. S. Co., Asphalt Co. v. Barber making pur for rate railroad —its value of a actual value than its condemnation be less may § under poses 15a— Kentucky, Co. Ry. in Southern v. said value. As was “The taxation: state involving 81-82, a case U. S. railroad —whether that of a elements value of physical de less cost of reproduction cost, deemed actual value be measure not the sole figure other or some preciation —is Ames, v. Smyth operation. value in to its or.güide present is to given weight Much U. S. reasonable, at rates that are capacity earning prospective and competitive and available to traffic having regard territory in served.” the other conditions prevailing the to command the ability Value has been defined valuable as and only is such property if, Railroad price.22 traffic If are too the will not high, far used. rates as, so de- necessarily or rate-base is the value' Hence, move. ,the commercial upon ability in the first place, pendent, rates which will of to command the a the property yield taxes; such operating expenses return in excess of the on which, than sum with the higher be value cannot “ 22 result of the rates rather than a plant the is The value of basis, upon established If rates are basis for rates. ... approximate cost, such reproduction cost, wiE to but this value tend operation economic law and not because a cer through wEl be Dorety, The figure F. G. Function been decreed as value.” tain has Compare 173, Cost,” Harvard Law Rev. Reproduction 37 States, Navigation 328; Monongahela v. United 312, 148 Co. U. S. Backus, Ry. 439, 445; Taussig, 1 154 U. S. & L. Co. v. C. C. C. St. Laughlin, 115; of Political Economics, Elements Principles of Economy, pp. 75-77.

505 15a can fair return under available traffic, § the. fixed lessening or volume of rates degression earned. Persistent ordinarily tends traffic, arising, from cause whatever ' It properties. of railroad follows, value's lower actual v. Smyth the rule required by Commission since the to de in Southwestern Bell Ames, case, re-affirmed dis value as § under 15a actual the rate-base termine making must in investment, it prudent tinguished from value of both upo'n consider the effect finding and, upon limitations rates and the legal commercial competition upon the effect other among things, of traffic. volume com-, striking examples affords experience

Recent parte 74, In Ex Increased rates. upon mercial limitations sought 220, C. C. the Commission Rates, 58 I. ag upon 6 cent yield per would establish rates which groups. railroads in the several values gregate $20,040,572,611— aggregate as the claimed carriers that, the cost of on their books'as being carried amount fixed The Commission the value and equipment. road In $18,900,000,000. cent lower—at order about 5 per 6 earnings equal per .cent, on that sum net produce rates, group, the eastern cent freight per increased rates; in the southern existing group then over per cent; cent; group the western per cent.23 As a group per result mountain-Pacific per ton increases, average these revenue mile gross per greater in the.eastern 96.1 cent was than district ended year southern, for the fiscal June 1914; 59.3; and in the in the 61.4; western, United States as a Rates, 1922, 76.2. 68 I. whole, 676, Reduced C. C. 23 increases, Large, general bad been made A in theretofore. rate Case, 1914, Per Cent per 351; Five

crease of 5 cent 31 I. C. C. Case, 325; 1917, per cent in Per Cent 32 I. C. C. 15 45 I. C. C. Fifteen 303; per General, and 25 cent General Order of Director. No. 28

506

Passenger rates subjected by were parte order Ex 20 74, flat increase of per surcharges cent were added, 242.)24 (p. On a large number of basic commodities, were among the most articles of important commerce, the rates to be proved higher than the traffic would bear. Reduc tions became imperative. Within a year after the entry that order, many applications reductions were made to the-Commission, only not by shippers but also by the carriers It themselves. was estimated that the reductions in freight rates by made the carriers prior to March 15, 1922, would aggregate for that year $186,700,000; would lower the general rate level nearly 5 per. cent. On some articles of important traffic the entire increase made parte Ex was cancelled.25 Further reductions were 74 Rates, 1922, then ordered Reduced 68 I. C. C. 676, the Commission"saying 732-3): “High (pp. do rates not necessarily high mean if the revenues, for, public cannot or will not in normal ship less volume, revenue may re sult than lower rates. Shippers unanimously from almost contend; many representatives of the carriers agree, ‘freight rates are too high and must come down.’ 24 They per been cent raised before. had Reductions, Rate See House Doc. No. Congress, 67th 1st Session, g., p. e. 7: Reductions all rates on throughout iron ore territory, including eastern the so-called generally points east -of Mississippi and north of the Potomac and Ohio Rivers, including, course, moving ex-Lake ports. ore from Lake Erie These reduc tions will eliminate all increases effected parte under Ex 74, and it conservatively estimated the amount will figures reach in round important $5,000,000 per year.” For instances of reductions made see Smelter Products voluntarily, the carriers Nevada & from Utah, Grain Illinois 374; Points to New Orleans, I. 61 C. C. from Copper-Duquesne Pennsylvania Reduction 38; Co. C. R.R. I. C. v. Co., I. 354-355. C. C.

507 mounted charges have transportation indicates that This flow ef com the free are impeding they 'to a where point which the purpose defeat thus to tending merce-and which revenues of producing established, they were of the' people the provide carriers ‘to enable would ” Further transportation.’ adequate with United States again are said to have year in the 1923 reductions made effect 5 cent.26 freight per lowered rates several Ex parte is rates authorized made reductions 7'4 $800,000,000 freight charges to have lowered said during eight traffic carried on the payable otherwise year 1923.27 Each December ending een months revenue in the lowering per further witnessed since has mile.28 per passenger ton mile of rates weighted average of the lowering constant

This de- due causes other than have been to 1920 must since adjust Its aim was to the Commission. on the sire part But return. yield prescribed would they rates so only there was inclusive, 1920 to 1927 from for the period United as a States railroads year one and greater efficiency, general prosperity despite whole, parte Ex brought down found in on the value earned 74 fair under prescribed return average the full date, 26 p. 726. Railway 76.1, Age, 1924—Vol. 27 Smith, May 28, 1924, E. Hall to Senator D. Letter Chairman p. Rec., Part 10275. Cong. 1922 1923 1924 1925 1926 1927 per— Revenue 1.194 1.132 1.132 1.095 (cts.)...... 1.294 1.114 1.096

Ton mile 3.093 3.037 3.026 2.985 2.941 2.901 Passenger (cts.). mile 2.944 Commerce Commission for Interstate Report of the Annual say persistent what extent this shrink- impossible to It p. adjustments rate miscellaneous and to what result of age has been Railway’s of traffic. character Statistics fluctuations extent C, 1927, p. X. States, C. the United I. 15a.29 refused repeatedly permit § The Commission make, reduction would reductions, because the carriers to § under 15a.30 sought to be provided lower the revenues although earning less than On other hand, carriers, voluntarily 15a, fair under have often prescribed return § due probably reduced rates.31 The rates was lowering 29 years by Congress fixed at The fair return for the first two was per cent, the Commission was authorized add one-half of to 5% per equipment. This improvements, one cent for betterments and granted parte 74, ‘additional allowance was in Ex 58 I. C. 220. For C. period prescribed the rest of the it was the Commission at 5% per 1922, 676, Rates, cent. The Reduced 68 I. C. C. 683. rate railroads, parte return on Ex value of the ás a whole calculated 74 brought date, down to was: 1925

1921 1922 1923 1924 1926 1927 1928 4.9 5.5 5.8 Percent........ 3.2 4.0 5.1 5.5 5.1 group years The return on that basis in the Southern has in most prescribed In the group exceeded that as fair. Eastern has the return prescribed. groups pre since 1924 In exceeded the Western appears Compare scribed return to been reached. never have Bon Original Reproduction Cost,” “Economic bright, Merits of Cost 41 593, Harvard Law Review 618. 30 Rates, 610-611; Trunk Line 589, & Ex-Lake Iron Ore 69 I. C. C. Import Vegetable Oils, 421; and Domestic Rates on Grain 78 I. C. C. Ports, & Grain Products Kansas and Missouri to 115 from Gulf 153, 164; Points, C. C. Products Grain & Grain to Eastern 122 I. 551, 563-4; Coal, 367, Cargo I. C. C. Lake 139 I. C. C. 392-5. See Seaboard, 740; Rates I. Louisiana 61 C. C. Salt from Atlantic from Mines, 81; City, 457; 66 I. C. C. Coal to 66 I. Kansas C. C. Coal Mines, Wyoming 254; Southwest, 68 I. C. Coal C. 73 from from 1922, 536; 48; I. C. C. I. Transcontinental Cases 74 C. C. Canned etc., Coast, 520; Carloads, 132 Goods I. C. Cement in C. Pacific from “ Henry BiHé, 579, Compare 140 I. C. 582. Wolf Power of the C. mRates,” Prescribe Minimu Commerce Commission to Interstate 5, 36 Law Rev. 30. Harvard 31 Utah, 374; Nevada and 61 I. C. See Smelter C. Products from Arkansas, Texas, 1; Louisiana and Illinois to 68 I. C. C. Coal from Kentucky, Virginia, 29; Tennessee and West 68 I. Coal C. C. from 74; Chicago Canal, Panama 68 C. C. Grain via I. Rates from from Ex- Orleans, 38; 69 to New I. C. Trunk-Line C. Illinois Points

509 influence of means of competing to the large measure transportation.32 to

Sixth. 1914, railroads have obliged, been Since extent, compete with water lines an ever increasing and. has been competition This with motors. fostered the Panama through Act;34 through Canal Goveriiment33 Sugar Rates, 589; I. C. Cases Iron Ore 69 C. 81 I. C. C Lake Points, Pig . 727; Iron Texas, I. C. C. Southern 448; 96 from Grain States, 27; and Grain Products Western C. Grain 104 C. 104 I. from Cincinnati, suspension 123 I. C. 561. 272; Coal to C. I. C. C. year 1928 shows that of the cases in which for the calendar docket become were effective with proposed permitted rates carrier existing reductions of rates and 81 were suspension, protest, out after 93 were increases. Reproduction Cost,” Compare Dorety, The Function of F. G. Law Harvard Review Act, 28, 1920, 91, 500, 499: Transportation Feb. c. Stat. § of'Congress policy promote, is hereby to be the en declared “It develop transportation, service, and facilities in courage, and water of States, the United and to foster the commerce connection with’ vigor transportation.” both rail and water preserve full and Ry. States, Co. United 274 S. Chicago, Island & v. U. Rock Pacific 48; 1922, 74 C. Cases C. Compare Transcontinental 29, 36. of I. Ry. Department v. Abilene, Co., etc. C. 77 I. States War C. United Exchange C. 528; Houston Cotton & Board Trade v. 317; 92 I. C. of 392; 268; Corp., 93 I. C. C. Reduced Com 87 I. C. Arcade, etc. C. 512; Coast, modity 89 I. C. C. Southern Class Rate to Rates Pacific 513; Commodity to Investigation, I. C. Rates Coast 100 C. Pacific 421; Cases, Terminals, Consolidated 123 107 I. C. C. Southwestern Coast, 520; 203; 132 I. C. C. Goods I. C. Canned C. Pacific from 643; Sacramento, 140 I. C. C. American Hawaiian Tinplate to S. S. C. R. 152 I. C. Erie R. Co., Co. v. 34 Act, Aug. 24, 1912, 390, 566, 11, c. 37 Stat. Panama Canal The § Commerce par. Interstate Act as 10 of incorporated now 91, 28, 1920, 482), c. Transportation Act, 408,41 Feb. (see Stat. 5 § § “ having any any interest common from car prohibits any railroad through the-Panama Canal or elsewhere with operated by water rier may compete does or Com . traffic.” . which said railroad Co., Products Steel 57 Application United States I. C. C. pare of C. 577. 685; 151 I. C. C. 77 I. C. 513; 510 waterways acts;35 through the inland

the intracoastal acts;36 development of waterways through coastwise 35 Cape pursuant purchased Cod Act of 21, The Canal to Jan. 1927, 44 47, 1015, of 2, c. Stat. resulted in tolls and an .elimination § large increase in vessel traffic. “The use of the immediate canal present undoubtedly operate freight under conditions to will reduce Report Engineers Secretary War, rates.” Chief to the Oct. and, 2, 1928, p. Chesapeake acquired 76. The Delaware Canal was improved pursuant 2, 95, and to Act March 1919, 1, c. 40 Stat. § 21, 1927, Act of 1277, 3, Jan. c. 44 47, Stat. 1016. § opening navigation the canal at sea level within the limits of project the dimensions under the has in.increasing authorized resulted passing through. the number size vessels New vessels advantage being take the increased facilities are constructed. Freight competi rates have been lowered a result of increased tion between Its on to hold carriers. effect rail rates is them at a Engineers Annual Report minimum.” of Chief of Secretary to the 2, 1928, pp. Proposed War, 408, Oct. 410. See Intracoastal Water way Boston, from Grande, Massachusetts to the Rio Act of March 214, 3, 13, 822; Secretary c. 1909, 35 Letters Stat. of War § transmitting Congress Engineers from the Chief of on Sur letter^ veys, January 391, 5, 1912, Cong., Sess.; House Doc. 2d 62 House September 1913, 233, 229, 11, Cong., Sess.; Doc. 1st House Doc. 63 September Sess.; Cong., 610, January 63 1st 17, House Doc. 11, 1913, 1914, Sess.; 2d Cong,, 1147, 3, 1918, 63 House Doc. Cong., June 65 2d Sess.; 238, April 12, 1924, Cong., Sess.; House Doc. 1st Senate Cong., Sess.; 8, 1924, Doc. 2d December House 586; Doc. 2d Cong., December Sess. improvements The river on the Ohio, Mississippi and the rivers, Warrior government the creation of the owned Inland Waterways Corporation barge operate lines has been followed legislation requiring join through the railroads to joint routes and providing May rates and 29, 1928, differentials. Act of 891, for c. (e), Although barge 3 45 Stat. 980. lines are still limited in § their through sphere operation, routes with applied differentials for by Corporation Waterways and ordered the Commis Inland Congress large pursuant sion to the a part direction cover of the parte 96, 129, Compare Ex 153 I. C. United States. C. 132. Annual Waterways Report Inland Corporation, 1928.

511 improvements,37 means of harbor through and shipping aid in There has highways.38 the construction federal lines. competition by pipe Compe- also increased been from other means has transportation tition tended traffic; in volume of the normal rail arrest increase has actually to some traffic it produced and as reduction has in the volume and the rates. It resulted both in. business;39 in in general shrinkage passenger some in a in freight;40 the carload regions, lessening and 37 instance improvement For an effect in harbor increas thereby reducing rates, ing shipping and rail see Annual coastwise Engineers upon p. Report (1928) Miami, of the “The Chief of 722: project pronounced had a on completion 20 foot has effect water-transportation The domestic'water-bprn'e railroad rates.” Atlantic, Gulf, 114, on the commerce Pacific Coasts from rose 231,530,937 tonnage in tons in 1927. The on 557,241 tons 1920 to connecting from rivers, 125,400,000 canals and channels rose 219,000,000 Engi Report of the Chief of in 1927. Annual in 1920 Statistics, 1928, p. Commercial New York State 3. On the neers 1,159,270 tonnage steadily in 1918 from canals the increased 1, p. Year The Book, 1928, Yol. 617. 2,581,892 in 1927. Commerce occupied and internal trade shipping in' the coastwise tonnage of the 1928. 9,743,000 in 1914 to tons in 6,852,000 tons increased from p. 619.

38 measure, has, large been stimu competition by motor The grants Congress since of fed possible by made lated , highways completed with The highway construction. eral aid aggregate aggregate 1928, 72,394 miles. The 30, to June federal aid! sys designated highway as federal aid mileage comprised is in what Roads, Report of Bureau of Public 187,753 Chief of miles. tems 1928, pp. Sept. 1, 3, 7. gradually dropped from per mile of road passenger miles 1927; from passenger revenues 141,800 in 199,708 1920 to Report $974,950,000 Annual 1927.

$1,286,613,000 1920 to shrinkage This continued pp. C., I. Dec. C. throughout 1928. traffic, example carload see For note 45. an of reduction

512 the less than car- the volume reduction

many, freight.41 load is on rates strik- competition of water

The influence on Panama Canal of the effect by illustrated ingly this In order to meet rates.42 freight transcontinental asked leave repeatedly have carriers competition water estab- voluntarily Rates sweeping make to reductions.43. on some articles now, are lower rail carriers by lished they others are in 1914. On were they than traffic, influence of competition higher.44 only little 41 all railroads of United freight on The less-than-carload 38,440,000 tons 1927. 44,338,000 in 1923 tons from shrank States region) Pocahontas it shrank (including the District Eastern In the 19,363,000 tons in 1927. Statistics tons 1923 23,321,000 from C.], p. XVII. This States, C. 1927 Railways in the [I. United continued has 1928. reduction “42 vessels, cargo general carried United States The volume of traffic, increasing has been intercoastal particularly in States United Report of of Panama Canal year.” Annual Governor year from 1928, p. for 12. severely the effect western lines we feel rather other Like all Pyeatt, president, Rio Denver & competition.” J. S. Canal Panama Age, 80.1, p. 10. Ry., Railway 1926—Vol. Western Grande 43 Transshipment Commodity via Rates Panama Class and Piers, York 81 Canal, 74; Reduced Rates New 68 I. C. C. from Commodity Coast, Rates to 312, 315; Reduced I. C. C. Pacific Terminals, 107 I. C. C. I. C. 512 Rates to Coast C. Reduced Pacific Co., R. Compare Hawaiian S. S. Co. v. Erie R. 421. American 703, 705, 707. C. I. C. “44 Canal, $10.90 Shortly opening Panama a rate of after the products zinc copper, smelter per ton was on lead established refineries for movement eastern certain far west mines to the from through canal. water Pacific and thence rail to the Coast points from the same to New in all rail rates forced a reduction This $12.50 per ton, $16.50 and then to per $22.50 ton first York; from Brass, Copper Bronze present rate.” In per which is the ton Tariffs, Compare Eastbound San Fran gots, I. C. C. Chicago, Agent City and Countiss Angeles to Kansas cisco and Los il of rail traffic the volume the inland on waterways of the Ohio improvement in the effect which lustrated Pittsburgh district. in the has had tributaries River and its 1914, in less than materially The rail 1927 was tonnage in The doubled.45 more than while tonnage the water rail or down holding in reducing fluence of lines barge competitio’n with rail rates by rates is illustrated and Mississippi on the Ohio, of the lines barge those I. C. Toll, 25, 1929, C. 1914, Agent I. C. C. 978, July 1, with March Seattle, Chicago and City to Portland 1209; Westbound, and Kansas 1929, I. Toll, 25, C. C. Agent March Agent with Countiss I. C. 984 C. 1065; Agent Countiss, I. C. with C. 1211; Agent 1209 Toll, I. C. C. 1084; Agent Toll, I. C. C. Agent Countiss, with Agent I. C. 1206 C. 1077; Agent Toll, Countiss, C. Agent I. with C. Toll, C. C. I. 1210 Applications of Agent Countiss, I. C. C. 1068. See I. C. 1211 with C. relief, Nos. Lines for fourth section Pacific-Atlantic S. S. the Southern 13638, 13639. competition Panama Canal striking A illustration of effect of by made proportional by rates

is furnished the reduction Orleans, May 31, 1928, ship- on New R. R. Co. to Illinois Central line) (steamship to California in order Redwood ments via the parity with Chicago District on a those place manufacturers The shipping the Atlantic seaboard. Pittsburgh-District via in the Chicago was from to New-Orleans on iron and steel rate domestic had and water rate to California proportional rail cents; 55 and the leaving cents, domestic was reduced to 31 been cents. It 39% A-10314. unchanged. I. C. No. Tariff C. rate 45 by 17,601, transported rail and 1914, 158, 327, 451tons were In 39,998,562by 152,872,882by and water. 1927, rail by water; 661 connecting and its advantages utilization of the Ohio The rail carriers amply demonstrated and the waterways been have by rail they to handle all routes cannot continue should realize economically transported by all can be more much which- traffic express The interveners fear that or rail-and-water routes. water jeopardize present will rail-and-water route over lower rates' founded, assuming to be well that fact structure, such fear but rate approval any plan withholding justify us in would not substantially necessary transportation.” cost promises to reduce 55, 43, 52, Co., P. 150 C. $ Branches C. Construction L. I. W. of competi The effect widespread ivers.46 the Warrior r the rates and volume truck in both lowering tion motor but indisputable, of rail traffic is obvious.47. N6t obvious, pipe potential competition has been the effect of the especially when followed barge lines, The establishment of barge routes, both to line tends through rail the establishment tonnage. Inland Water rail rates and volume rail See reduce R., 126; ways Corporation G. 151 I. C. C. Coal v. Alabama R.S. 549; on 543, Rates Kentucky, 151 I. C. C. Western Coke from 602, Compare Fertilizer, Florida, C. 608. 151 I. C. etc., Within 1910,” Har Clause Vanderblue, “ Long Short Haul Since development barge lines, As to the Review vard Law Waterways Report Corporation for 1928. see Annual of the Inland compare authority R., on & Maine R. For instances Boston 2565, 2597, Nos. A-2535, 2540, 2600 with issue I. C. C. C. C. Nos. I. 1706, 1717, 1719, A-2556, 2657, 2600, 2654; M. D. P. U. Many 1730; P. 1166. illustrations of this are afforded N. H. S. C. Act by applications made under Interstate Commerce for the § competition, change rates than permission, because of motor on less 23, 19, days’ period from Nov. 1928 to March notice. In the by the & Rail applications w’eremade Boston Maine 1929, six such Hartford, York, by & New Haven and two road; by five the New was Albany. In one instance the rate reduced to less Boston & the just one-half; by the one-half; in another to and'in others than related, among percentages. others, varying The reductions to ar-. lumber, heavy scrap bulky stone and and as tides as as crushed as by Among applications such made western lines iron and wire rods. and Atchison Pacific for carload are those the Southern 87,724) (86,227); (Nos. 87,723, on dried fruits sugar on and rates Pacific for carload rates on iron or steel and that of Southern the (No. pipe 90,219). Transportation before Con paper In a delivered the Mid-West R., Peimsylvania Morse, ference, general superintendent, R. R. C. “ than the box car for proved has more economical

said: The truck and, freight for short transportation of less than carload hauls long Rail special circumstances, comparatively under hauls.” p. way Review, 1116. 1925 — Vol. Powell, Railway Club, T. In an C. address before Western great change, Chicago Ry., said: The

president, & Eastern Illinois therefore, growth this place has since has been taken simply ownership of traffic, by this not and I mean automobile by in oil rates caused the threat by lines reductions shown of competing pipe-lines.48 which not

Moreover, high rates are so as prevent required the movement of traffic are often commercially with some they statutory, pro be lowered because conflict reduction of rates Thus, Congress vision. compels arti unjustly against individuals, localities, .discriminate striking or most Perhaps cles other carriers. traffic of rates which traffic instance of limitation law by cases under would is furnished commercially bear a rail carrier By clause, haul clause. long and short of the Commis relieved obliged (unless is ofteh order a total loss of sion) suffering practically to elect betweén á or suffering competitive points traffic between existing at both the by reducing rates loss revenues existing noncompetitive competitive intermediate points rates, limitation upon this points. effect of very become railroads, has hence upon actual with the grown steadily growth Its has great. influence passenger automobiles, to the automobile but diversion large passengers freight laige number and- truck of a motor heretofore tonnage respectively, of the character handled freight, gross-revenue producing los3 of traffic carriers, and this steam on main lines as well service about a reduction train brought has upon marked the number very effect lines, which has on branch Review, Railway 1925 service.” employees engaged train — Vol. p. bus truck as com on the motor and motor For further comment Railway transportation, see auxiliary instruments of petitive and 75.2, 995; 76.1, 319; 77.1, p. p. 71.1, 432; Vol. Vol. Age, p. Vol. Vol. 1017; 80.1, pp. 12, 547, 918; p. 1513; 79.2, Vol. 275; 78.2, p. p. Vol. Vol. 801; 153, 381; 81.2, p. 1981; 81.1, pp. Vol. 80.2, pp. 1401, Vol. Vol. p. 753; 84.2, pp. 601; 83.2, Vol. 83.1, p. Vol. 82.2, p. 1651; Vol. Vol. Engineering, Railway, and Locomotive p. 399; 1025, 1315; 85.1, Vol. p. 305; Rail News-Record, 96.1, Vol. Engineering 1928, p. 37; Feb., 77, p. way 604. Review, Vol. 48 (I. & S. Products Petroleum Oklahoma Petroleum and from 483, 3144, April 6, 1929), 153 C. C. 486. I. 516 growth water and with the in competition by motor, the growth size of the individual railroad with system,

in for their revenues railroads dependence upon with the long-haul freight growing length traffic and important haul.49 It has become so for rail average freight to hold share of the traffic at long-haul carriers haul long clause, and short competitive points, in the large if results carriers’ from, giving, not relieved non-competitive points the intermediate measure, otherwise, subject monopoly exactions, which would lowering required rates to meet' the full benefit many applications The for reductions the competition. operation for relief long made petitions from rail, illustrate ás haul clause the influence short - -thus motor, competition depressing of water well as has that clause limited Congress values tes.50 ra under § almost as effec making purposes 15a, rate for means of trans competitive tively promotion its portation. for In that the be ascertained

Seventh. requiring the rate- Congress imposed upon making purposes, rate Ames, Smyth v. still another limitation defined base as declaring in its operation. By far-reaching “ in the exercise of its the Commission shall, 15a that § average freight haul for 1927 the period from 1914 to In the 144.17, miles; from 172.11 railroad increased individual single system, a- railroads ás increased all the average haul,'treating Report of the Interstate Com miles. Annual 255.43 to 314.75 from . 1928, p. 114 Commission merce Rates, Ex-Lake Iron Ore 589; 69 I. & C. g. Trunk-Line C. e. See Piers, Sugar 312, York 317; I. C. New C. Rates Reduced from Vinegar Coast, Rates 448; 1922, C. C. Cases I. from Pacific Points, Reduced 27; 104 I. C.C. 666; Iron Southern C.C. 81 I. from Terminals, Coast 107 I. C. C. Commodities on Rates Pacific Applications, 129 I. C. C. Fourth Section 23. Coast 436; Pacific 1910,” Long Haul Clause Vanderblue, and Short Since Compare Rev. Law 36 Harvard

5Í7 ” -power just to prescribe and reasonable adjust rates so that them the fair upon value a return be earned may and'economical, "under honest, efficient management” Congress efficiency plafct an test made element.-or of Efficiency value.51 economy imply employment right :of the instrument and material their use as well as To right manner. use a after a much machine; and more is better economical one has become available, typo operate as as to use an efficient men inefficient machine, equally when the work could be well performed of at half the labor Such an instrument by one, cost. well although originally conceived transportation, like machines used manufactur- should, remunerative, it be when becomes wasteful. ing, scrapped any recognized that, of now Independently statute, sought it is actual prove in confiscation cases when evidence must reproduction cost, evidence of a such installing to the cost present plant- be .directed tQ service. For required same supply as would reproduction cost implies utilities public valuation high to allow enough should be rates permitted that on the that would money return cent per a reasonable a of render- " required plant capable to construct now be ”; does that service not mean' the desired ing at would be needed to valfied what now should be plant been com “used and useful” had cases the term In confiscation provision, makingT-ihe specific employed monly valuations. inserted in 15a economy, was doubtless efficiency and requiring § expressed had a doubt to the Commission theretofore because rates, could, determining reasonableness which it extent ‘ management. Compare economy efficiency and .consider Case, This Rates — Eastern 20 I. C. C. 278-280. Advances (5) paragraph also light in the provision must § be read Act, by Transportation Commerce Act to the Interstate added charges depreciation prescribe what Commission to directed the operating expenses. part of the be allowed as should 52 Proof evi- of value duplicate plant precisely.” Eke dence cost reproduction presupposes plant the, To valued would then be constructed. being in- a railroad instruments which are employs extent that would not be efficiency plant consistent with con- and because of the inefficient the railroad structed; part, then,worth reconstructing not the cost of obviously a, identical While often has some service 'part plant. existing not efficient to the value, although according unnecessary its use involve standard, may heavy, súch render valueless for rate operating making as to expense The Commission requested § 15a. when purposes under cost must, therefore, consider evidence of reproduction every examine the of óf and that of plant, thé part value of modern, whole as with the value plant, compared efficient such Commission plant. 'Upon consideration may conclude that the railroad is so obsolete largely as, construction and evidence of the render equipment of the identical of no reproduction plant probative cost The so deal duty force whatsoever. with the evidence from rejection to flow the Court necessarily seems as the measure of value and the prudent investment actual at property adoption, instead, hearing as the rule of governing the time of the rate sub- stantive law. Costs,” p. 6. (Reprinted Brown,

52 Harry Gmmison “Present 7, Fortnightly, 1929); Dorety, Public March from Utilities F. G. “ Reproduction Cost,” 173, The Function of 37 Harvard Law Rev. Econofnics, passim; Bonbright, Quarterly XL James Journal of C. Engineers, pp. Compare Proceedings, Am. Soc. of 295, 317. Civil City Spokane v. Northern 1916, pp. Compare Pacific Ry. Co., 393-4; Goddard, The Evolution of the I. C. C. Base,” Cost of the Rate Harvard Law Rev. Reproduction 572; Robinson, Utility Public “Duty to,Serve at Reasonable 243, 256; War,” Rev. “Railroad 6 No. Car. Law. Rates: Valuation 75.2, Railway Age, 1923—Vol. Craven, Va Leslie luation" pp. 807, 808. The physical deterioration of a railroad plant through wear and tear be may very small as compared with a plant while new, its deterioration may very functional large as with a compared plant. modern efficient This less- ening of service value be due to may any one of several causes. It inmay, the first be due to place, wholly causes external. Freight well originally conceived and terminals, wisely located the heart a city, may have become valueless for rate making § under purposes 15a, because through growth city expense operating therein has become or the cost of high, inescapable so eliminating so grade crossings large, efficient man- agement requires immediate abandonment of the ter- minals.53 even if the cost And, of continuing operation there is high require not so as to prop- abandonment, erty may rate-making have for purposes value far below Minneapolis its market value.54 & Louis Compare St. 53 paper In a Society Engineers, delivered before the Western Scarr, supervisor service, Pennsylvania F. J. motor R.,R. said: “We conducting operations through inadequate inefficientterminal are facili ties, antiquated and means of gen methods. . . the . Before acceptance eral dependable of the motor vehicle as a means of trans only portation, we had the horse drawn vehicle for the available freight highways. movement of over limited The effective radius action, speed, capacity, slow and low of this instrument forced place freight pro railroads to on track stations as near the centers consumption regardless possible, duction and cost almost or expansion requirements. future factor, competi This with reckless between carriers, engage ap tion influenced railroads in what .by proaches transportation, establishing retail of innumerable private sidings. small my stations and It is firm that conviction truck, greater had of action, greater motor with its radius ca greater pacity, endurance, available, and been greater'flexibility, carriers developed adapted would ad have terminals better to take vantage 78, p. Railway Review, these characteristics.” 1926 — Vol. 790.

expensive " 't downtown ime is fast city property approaching for when freight houses, railroads will and stop will, by buying freight' freight trucks, costly use handle from outside less and 257, 268; Willcox v. Minnesota, 186 U. S. R. Co. v. R. 212 U. S. Co., Gas 52. Consolidated of a of the rail service value part the. lessening The or in the volume char changes from flow may plant road are obvi efficiency For economy traffic. of its acter the business reference to with to be determined ously A sta about to be done.55 being then done the carrier have be freight may for less-thaii-carload tion warehouse because, through for rate making purposes,- come valueless all substantially lost the railroad had competition, motor reduc Large at that point.- its less-than-carload business equipment stations and passenger in the value of tions traffic. in the passenger may have resulted from decline they all service value so may Branch lines lose their has transportation motor be abandoned be'cause should hand, may the traffic more On the other become efficient. of a inefficient a part so much as to render have grown economy- consignees’ , houses direct door.’ . . Where hauling freight in. into terminals situated on the most valuable land why freight through Chicago, .should this be hauled same Chicago’s delivery? delays congested district . . . most congestion, costly elimination, are switching, due to so their very only part, pay very-large handsome dividends on a would if See, Railway Review, 78, p. capital 1926—Vol. 403. investment.’’ 71.1, 21; p. Engineering also,- Railway Age, p. 968; Vol. 81.2, Vol. -News-Record, 96.1, p. Vol. Case, in Rates — Eastern C. C. See Advance I. 271: originally mountain, constructed over a that a railroad is Assume steep up being haul the traffic and .down mote economical to grades great outlay, required by incur which would than to ¿ development constructing the of traffic the time tunnel. With pierced, and is accord comes when this mountain must be a^tuhnel Whgn"ffie large expenditure. tunnel ingly-constructed put at a is into and the line over the mountain abandoned the cost Of the service tunnel is added and the cost of the abandoned railroad subtracted cost, that, books, shown the construction so as the cost of from though tunnel is the -same as the had been at built the construction outset.”

521 heavy grades56 line originally wisely constructed with or In de- economy efficiency curves.57 that event and will may mand elimination of and even grádes the and curves Morse, C. engineer, Chicago, Ry., A. Rock & Pacific Island chief Society Engineers an in address before the in 1926, Western said: “ Comparatively grades little been and has done in the reduction today country great majority-of a the trunk line railroads this operating grade are over were considered lines-that economical days -75years'ago. or built in These railroads were the before steam developed, shovfels grading and other mechanical been devices had and drills, powder when rock was with carts. handled hand black and The grading very expensive they sought result was was and grade the ruling minimize it. . . The reduction the and in . rate cheaper transportation of curvature will result in'both a saving During twenty-five last has years, . . . it time.' the been practice the grades con most railroads to reduce their nection unfortunately with the construction track, second a but many- additional main track has been constructed on older roads lighter ruling grade appreciated. before value of the was grade practically rebuilding reduction means of such expense lineé and together interruption of this with the to traffic being while it is prevented being done has much of this from carried out, subject thoroughly investigated, apt unless the is we are Simply impracticable. maintaining consider it . . first as . grades roadway that, class condition a as as far are and alinement concerned, type as is of such was constructed century ago, a half is maintaining not a modem . great railroad. . . With ma jority operating grade railroads over lines that line have century big job and curvature of a ago, half to modernize roadway.” Age, Railway p. 80.1, Engineering Vol.’ 279. See also NewsrRecord, 96.2, 96.1, 309; Vol. p. p. 803; Vol. Railway Review, 937; 124; p. 78, p. p. 187; Railway Vol. Vol.. Vol Vol. Age, 81.1, p. 181. "Curves, long record, important is a matter of have an re- speed'of transportation

lation trains cost of well as to track maintenance, very sharp while have' a curves relation safety ‘ 10-year It been found that period, traffic. has in. with re- no’ rail deg. on rails curves, deg. newals were renewed on 2 once curves’ degree deg., twice on 3 twice oh 4 Furthermore, once or curves. displacement by -traffic has triple track necessitated double or far In so tunnels or a cut-off.58

require building , obviously would a the railroad exists, as such condition curves;59 grades and heavy with the not reconstructed ^ of the whole cost considering and the reconstruction when curves, a corre surfacing sharper there is amoufit of on the and engine work spondingly greater driving wheels, so that an on wear period of ing regularly sharp curves has a shorter over numerous re-turning the shop for tires. service before it has to be to sent ” 306.) 96.1, For News-Record, p. 1926—Vol. (Engineering . . . curves, see improvements grades on and Rail comment further 519; 1191; way 73.1, p. 94; 75.2, p. 78.1, pp. Vol. Age, Vol. Vol. 85.1, p. 403; Rahway Review, p. 75; 81.1, p. 551; 79.1, Vol. Vol. Vol. News-Record, 94.1, p. p. 507; Enginering Vol. Vol. “58 Tracks, though, just important cars are as and locomotives moving reducing, trains program railroads’ costs heavier in the just spending more than has finished New York faster. Central $20,000,000 get freight Albany and across the Hud trains around having pull son without to lower them to the level and river river again. spending $16,000,000 up The Illinois is for them Central through straighter, line Illinois and flatter and economical mor.e crossing spend Pacific is The Southern Kentucky, the Ohio river. ing Oregon and Cali sum to build Natron cut-off in a similar its Siskiyous. get grade The Central fornia to over the a better be Georgia spending $5,000,000 is to relocate and rebuild its line Jersey Birmingham. Columbus, The Central of New tween Ga. and Bay, putting three miles across Newark is a four-track steel trestle spending $5,000,000 $10,000,000job.. & is The Louisville Nashville out of reach of or more to and its Gulf line raise move Coast couple Ry. is*--spending a of millions storms. The Southern moving coal trains out of grades shorten the haul and cut projects repre Appalachian These Atlantic. fields to South improvement possible in sent make it the fu the kind will that' carry development that ture to on American rail the same line they roads could. Each will have followed whenever and wherever pay costs, transportation along with hun for itself in reduced possible Rail improvements dreds of other lower will make rates.” way Review, 77, p. 522. 1925 — Vol. “ expect’ freight large heavy If it amounts reasonable is. offered, question adopted paramount grades will be importance be'given consideration, careful should most lightest grades if possible adopted, even some increase in should be of the line part must be property given merely scrap Compare City Ry. Southern value. Kansas United Co. v. States, 231 U. S. 423. mqst

Perhaps the common of of lessening cause serv- of parts originally ice railroad well plants of conceived in good and still condition physical is the in the progress art rail of Science transportation.. and invention have since wrought 30, 1914, June such extraordinary improve- ments of types and aeroplanes automobiles that.no one would contend that service present value of such machines should be ascertained enquiring what their cost was original or what their reproduction cost would be. .The progress 30, 1914, since June in the art of transpor- tation railroad has been less but spectacular; the art has. been far. from In stagnant.60 railroading, as other distance and considerable increase in thereby, cost is caused because grade govern and curve tonnage any resistance locomotive . haul; will and as of the limit the size the locomotive that can wide, high be built within clearances of feet and Í5 feet has been reached, grades nearly improve we our must to secure lower cbsts handling. of importance light grades an

"As illustration of the of to increase reduce, thereby movement, may loads and train cost of we cite tonnage fact that about times as much can three be hauled on a grade tenths, per mile, grade of two or 10.6 feet as on a of per one cent, per mile, expenditure energy. 52.8 feet with the same of On or. grade only a tonnage four-tenth half as much can on be hauled as engineer power.” Stevens, a level with the F. same S. maintenance Reacting Railway way, Ry., Review, 72, p. & Phila. 1923—Vob Railway Johnson, president Association, Alba B. of the Business testifying on before the Committee Interstate Commerce in Senate longer said: The locomotives and ears and the heavier trains brought rails, road-bed, bridges about new standard and other possible structures. If it to show on a chart the rise were in cost replacing telling as a whole we would still not the railroad represent only story, higher increase whole because the would not a, wages prices change plant. but level of and in the character of the bridges frogs powerful; heavier, Rails ballast and switches and are more signal stronger. Capacity was increased installation of track of labor business, the rise in the cost great fields of have stimulated service, the need of better supplies, utilization; Through .their only inventions also not but transportation instruments advances technological have been efficiency economy largely with increased ;The operating costs lower price of developed. which progress parts plant of those scrapping increased present greatly obsolete.61 the art renders 1920, their compared with efficiency of the railroads'as present are, improved credit, prosperity and their greatly intro measure, advances madé toward due to the large rail transportation ducing improved instruments much remains Obviously become available.62 which have to be done. expedited cheapened by shop and new Repairs have been

systems. pound replaces pound 60 machinery. ‘The rail . . . a . 90 . . with new replacing worn out locomotives Instead of . . . rail. . design type which .(cid:127) . the railroad orders the same ones of outlay original expected to earn the difference in but is costs more economy principle runs work. The same with does the the equipment and of road and through schedules of maintenance all the See, Age, 76.2, p. Railway Vol. 1039. additions and betterments.” Engineering’ 1295; Railway Railway Age, p. and 71.2, also, Vol. Railway p. 274; 78, Maintenance, p. Review, Vol. 601. 21, Vol. 61 railways country of this operating returns of the glance “A at the liberally to added most their which have those roads will show that making showings.” today the best Rail years in recent are facilities 71.2, p. 1295. way Age, 1921—Vol. 62 of the of the railroads United States investment account The 31, 1927, $5,- 31, and December December 1919 between increased Nearly that sum was per 25 all of cent. about 152,751,000—that shop and in and facilities improving road, the terminals expended in During period the equipment. outworn and obsolete replacing operating reve percentage improved greatly. The ratio operating expenses 1920, was: years operating in the several consumed nues cent; 1923, cent; 1922, per 1921, per 82.71 79.41 cent; 94.38 fer cent; 1926, cent; 1925, 74.10.per 1924, per 76.13 cent; per 77.83 oper improvement in the per The cent; cent. 74.54 per 1927, 73.15 large increase) measure was due in (after rate ating-ratio 1920 among possible, This made plant. railroad improvement of the extent this technological progress The may be illus- the modem trated locomotive. The development of stoker, mechanical superheater, booster, and other in increase devices, the size boiler, other radical in changes size, weight, design have resulted engines production recognized which are by rail- having an way experts set such new entirely standard efficiency in fuel consumption,63 in tractive power,64 in speed65 arid as to render wasteful, under many condi- things, a ©¿employees other reduction in the 2,022,832 number from in., 1,735,105 reductip^ 1920 to The the'operating 1927. ratio and continued, employees the number of has 1929. See Monthly 5, p. Labor Review, Yol. No. 215. number of loco- motives on 3,629 was less than on December December 1919;. freight 48,089 Report the number of cars less. Annual of Inter- state 1928, pp. Commerce Commission for 111-114. 63“There are numerous cases the unit consumption where fuel represented good practice years

locomotives that ago five or six has been reduced almost one-half by thoroughly locomotives of modern design. saving goes This alone toward paying far a return on. required thoroughly additional produce' investment a' modem traveling power plant.” Railway p. Vol. Age, 82.1, 171. development

“As a result of intensive and improvement, it is not unheard of per modem locomotive to handle 80 cent more ton- per. per miles hour on 50 cent consumption formerly unit fuel good performance.”' Railway 84.1, Age, considered Vol. locomotive p. Age, 72.2, See, also, Railway pp. 659. 79.1, p. Vol. 1295, 1686; Vol. 256; p. Vol. 83.1, Great, Ralph president Budd, Ry., in Northern an ad is-just beginning dress in It delivered said: 1927, to be realized that principle while in is the steam locomotive the same as it was a few years efficiency ago, locomotive, exemplified of the as type, practically doubled, modem has been measured in ton-miles transportation Railway of fuel per Age, 83.1, unit consumed.” Vol. p. Railway See, also, Engineering, 250. & Locomotive Nov., p. 326; Railway 78.1, p. 26, Age, Vol.

65 “By producing of'transportation ton per more miles it hour postpones reduces total required; number locomotives it time when increased in and proper investment tracks most other'fixed necessary; ties capacity to increase will be it reduces the number of no matter good how locomotives, the use older tions, performances as to actual their condition. Statistics with that but a today compared built locomotive illustrate this advance graphically great few years ago efficiency.66 in important changes compelling. are But

Its economies of its effective roadway conditions equipment and are on the greater make demands Heavier use. locomotives main large To obviate carry them. road structure re upon frequent repair and attendant expenses tenance To be made more durable.67 roadway-must placement service; required be in train employees required; -or that would employees signaling dispatch number required reduces charges hardly fixed or fact, any form of ing there trains —in it otherwise would expenses is not made less than that transportation output per ton miles produce increased that an locomotives Engi See, also, p. 493. Railway Age, 81.1, locomotive hour.” Vol. Railway Review, 74, p. p. 58; Vol. neering News-Record, 98.1, Vol. Railway p. 78, p. Age, 83.1, 240. 203; 601; Vol. Vol. e Engineers Society of Mechanical Transactions of American Se 26; 78.1, 81.1, 334; Railway Age, p. Vol. (1921), p. Vol. Vol. 322; 84.1, p. 659; Vol. 83.1, p. Vol. 487; p. 928; Vol. p. 82.1, Vol. p. Engineering, Feb., 1927, 1153; Railway and Locomotive 84.2, p. Engi 41; Railway Mechanical 326; 1928, p. 42; Feb. Nov., p. Compare 77, p. 405; Vol. 521. July, 1927, p. Railway Review, neer, 1929), 14, 19. Commonwealther, (April, pp. 2No. 15 The “67 development in the track structure steady There has been a given way to sections have years. Rail of 75-lb. 85-lb. recent divisions; many cinder ballast of.110-lb., and 130-lb. on 115-lb. stronger joints have stone; by gravel gravel replaced has been and other accessories plates, anchors and more tie rail- been installed improvements the im spite of the saíne and in these At time used. (cid:127) mainte directly touch with among pression most remains those go-much further afford the roads can still nance work Maintenance, Railway Engineering and economy.” direction with this p. 190. Ibid., 22, p. See, also, 1926 — Vol.

527 length of increased and this rails heavier section,68 end freely used to Anti-creepers prevent are are adopted.69 are selected; they ties are and Larger rail movement.70 is deeper Ballast made treated to prevent deterioration.71 rather than of cind heavier; gravel and and of or stone And to Bridges stronger are of construction.73 ers.72 68 lighter type commonly most used Rail of 85 lb. section or was the Railway 70.2, p. per 998. cent prior Age, to 1914. 1921 — Vol. 68.8 2,806,930 was tons of rail rolled in the United States in 1927 Railway Age, 84.2, p. section or 1928 — Vol. 900. 100 lb. heavier. 78.1, p. 181; 79.1, also, Railway Age, p. 413; Vol. See, 71.1, Vol. Vol. Railway p. p. 393; Review, Vol. 101. Railway

69“The American has announced that new Association specifications increasing length from of' rails 33 to 39 ft. standard approved organization. change have been This will result saving joints per 16 cent reduction in the number of rail and a in a angle spring bolts, nuts, one-sixth the total of bars and of about Engineering News-Record, 95.2, required.” washers now 1925 — Vol. . p. 816. “70 26,400 hours°of this anti-creepers The rail labor on thus saved arising entirely saving from the thirty year stretch aside mile in one rail, lessening damage fastenings, equipment caused from the where expansion line' rail was by wide uneven and surface entire of the test the track was permitted creep. a result se As anchoring inaugurated of all double curely practice anchored tendency creep.” Rail single showed a track and whatever track 19, p. Maintenance, 114. Engineering and 1923 — Vol. way p. Railway News-Record, 94.2, 844; Engineering 1925—Vol. See 22, p. Maintenance, 15. Engineering and 1926—Vol. News-Record, 94.2, Engineering p. 674; 1925—Vol. See Vol. p. 958; Railway 84.1, 95.2, p. 1928—Vol. Age, Chicago noting Railway replacing & Northwestern In is “ bridge which, good day it built,” as as the was too while still being carried, Railway Age now light for the heavier loads ob railway many serves, This is units construction characteristic maintained, which, properly show little or no if' evidences of wear but though just they give way truly (1924 as wore out.”, must —Vol. 918.) 77.2,.p, traffic, watering the movement stations74 and facilitate of of are improved désign automatic introduced. signals75 loco employment effective of the modern Moreover, ordinarily larger motive involves the use of cars of steel small capacity the wooden car of construction, displacing of the In many equipped which railroads were with so built Engine prior 1914.76 terminals and carshops many inadequate77 in efficient and are, cases, rapidly replacing anti equipment is pumping efficient 74 “More Engineering Maintenance, machinery.” Railway and 1926— quated Railway Age, p. 22, See, also, 84.2, 1329. p. 132. 1928—Vol. Vol. “75 locating improvement of equipment and methods The operation, .signals requirements train have to a meet the of modern signaling placed automatic great obsolete much of the extent rendered years ago.” Railway Age, 83.2, 1927—Vol. service or more p. 1144. years ago “An made a few disclosed investigation one railroad all-wood large number of ears of con fact the retirement of replacement with new cars of steel or steel struction, and their under saving which construction, in maintenance alone frame would effect of per cent years in five it was would amount to about 68 estimated thorough study A equipment. entire cost of new ... today operation Would lead freight car maintenance economics 400,000 respect 300,000 to the or startling with equally conclusions to. Railway freight still in service.” cars weak and unsuitable which.are 70.1, Railway Age, p. Vol. also, 1.1, See, 53. Age, p. 1921—Vol. 989; 645; 74.2, p. Vol. 73.2, p. 72.2, 1515; 490; p. Vol. Vol. Vol. 462; 79.1, 186; p. p. 80.1, Vol. 78.2, 1443; p. 1023; p. Vol. 75.2, Vol. Railway 1556; 85.2, p. 916. Re 82.2, p. Vol. 1301; 80.2, p. Vol. Vol. 522; 78, p. p. 767. p. 1073; Vol. view, Vol. Vol. 77 “ crane, traveling well as overhead, electric The advent of the improvements, such and other exhausting devices the modern smoke buildings obsolete class. type into many older thrown have existing to an facilities modern very to, add It difficult ... is contemplation designed constructed without plant is run install crane impossible to is of such added . It facilities. . . lack existing buildings, due labor-saving ways other devices existing structures.” strength in the and insufficient clearance 450. 68, pp. 449, Railway Review, 1921—Vol. facilities and the enlargement locomotive terminal modern- admittedly the equipment locomotive terminal most. ization of economical handling, housing and repairing modem :the and cars, locomotives and must be replaced to prevent curtailment of the productive capacity of the rolling-stock idle, by needless hours awaiting while or repair.78 service And the waste incident to the use of shop-tools and ma chinery long since rendered obsolete by progress the' art must be stopped.79

Thus, the efficient post-war railroad differs plant wide- ly from even the efficient one the' during That here in recapture period question plants most physical needed improvement in railway today structure of . . . many railways there are on which the locomotive terminals have practically improvements received years.” no for more :than fifteen . Railway Review, 74, p. 1924—Vol. 151 “ days rapid improvement These are Of methods, many in in which long bgfore facilities become obsolete normal their service life has particularly been reached. This is true of terminal facilities.” Rail way Age, 83.2, p. Railway-Age, 66.2, 1927—Vol. 966. See, also, Vol. p. 994; 68.2, 1702; 69.2, p. p. 729; 7:1.2, p. 890; Vol. Vol. Vol. Vol. 76.1, pp. 269, 314; 76.2, p. 1494; p. Vol. 78.2, 83.1, Vol. 1071; Vol. p. 249; Railway Review, 72, 112, pp. 495; p. Vol. 77, 522. Vol. “78 The real problem, therefore, terminal providing is -of that facil railways will enable ities that some to effect reduction in the enormous idle locomotives now investment held at terminals.” Railway Review, 72, p. See, also, Railway Review, 1923—Vol. 176. p. 344; Railway Age, 70, 68.2, p. 1745; Vol. p. 1354; Vol. 74.2, Vol. 75.2, p. Vol. 1141. “ ’ is good said that' any enough It machine that will run is for a shop and railroad falsity railroad while most men realize of this large statement, seemingly obsolete, out it is borne number of Railway Age, p. worn-out machines use.” 71.1, now 1921—Vol. 1. earnings appreciably “Without net doubt, are reduced railroad many shops machines obsolete and inefficient now used in railroad enginehouses;” Railway Age, p. 1923—Vol. 211. 74.1, “ any trip inspection through The tools to on your be seen own shops roads, many generation or those other are in cases a out grown.” p. Railway Review, 74, 1924—Vol. 733. To the same -Railway 1101; effect, Age, 67.2, p. 69.1, p. 90; 70.1, see Vol. Vol. Vol. p. 222; 72.2, p. 1205; 74.2, pp. 1351; 629; 1082, p. 81.2, Vol. Vol. Vol. 83.2, p. 706; 85.1, p. Vol. Vol. 599. the War bhilt before States of the United railroads transportation instruments improved lacking

were com- is of art progress recent available made many today is even That this true knowledge.80 mon To the extent denied.81 railroads will not- be of the there was and is functional inefficiency plant, there is functional value. That this actual lessening depreciation, through external through changes, arising depreciation,' “ ordinarily or the econo given to obsolescence Little attention solely because of equipment replacement modem my with more In their failure the newer units. operation cost of with the reduced many railways of'the trail far behind principle this appreciate high op penalty in they paying the utilities the result that are with de way engineering maintenance of erating costs. . . . oper it cannot afford to equipment with partment is cluttered p. 2. Engineering Maintenace, 1926—Vol. Railway ate.” 81.2, p. 1091; Railway p. 621, Age, Vol. To see effect, the same Railway p. Review, 784: Vol. - They past. built railroads were for the locomotive Our operated are in accordance with locomotive were and things manufac- It remains to do on railroads the past. . . . improve. ones locomotives, old done —to build better turers have improve- these according to the new conditions operate and to them Age, 72.1,-,p. Railway 1922—Vol. themselves have created.” ments Engi- Society of Transactions, Mechanical See, also, American p. 43; Engineering 999; Railway Vol. (1919), p. Review, neers 729; 98.1, 58; 69.2, p. Vol. News-Record, p. Agé, Vol. Railway Vol. 123, 492; 79.1, 256, 505; 81.1, pp. 45; p. 269; pp Vol 76.1, Vol. Railway Engineering & p. 311; Engineering, 43.1, Mechanical Vol. Maintenance, p. Vol. 2 81 68,942 use on American Rail- In 1920 there were locomotives in. ways. Commerce Commis (41st Report of the Interstate Annual reported by the sion, 12,000 to be obsolete 107.) these were p. Of (Vol. Railway Age 33). 2,648 locomotives in. service 68.1, p. Of the twenty were more than O., 633 on the B. & on December ¿total 1,865; of a of Southern, out years the locomotives old." On Line, Air of Erie, 1,540; on 142 out 474' of the Seaboard on out the 757; -Pennsylvania, on the 581; Lackawanna, the 57 out of and on age. In 1926 it was esti- 7,599, 624 out of a total of exceeded of transportation, means and competitive through prog- may, ress in the art of to a transportation, respect par- railroad, ticular have become so to more than large increase in its counterbalance actual value which from rise in price would flow level since otherwise 1914, seems clear. may t,hat

It of urged continued use the inefficient plant82 and than repairing replacement rather of its antiquated has been due to of parts,83 lack and capital Railway Age mated of per editor that 68 cent the lo- comotives then in use over years (Railway Age, were ten old. Vol. 81.1, p. 493. were 65,000 In there about locomotives use. according Railway (Vol. Age p. 950): Of to the these, 84.2, There probably 15,000 20,000 are between country, and locomotives in this years older, old practically or which have none those features regarded equipment locomotive now that are as the ear-marks power.” of modern motive 82 g. longer capable e. Locomotives no pulling heavy loads, in being scrapped stead of rebuilt, frequently or have been continued service; switch-yards. use for branch-line or suburban inor It is passenger said that their use in such service has been rendered comparative wasteful economies the modern motor rail- 315; Railway 72.1, p. 72.2, p. car. Age, 1372; See Vol. 76.2, Vol. Vol. p. 975; 82.1, p. 563; 601; Vol. 83.1, p. 84.1, p. 753; Railway Vol. Vol. Engineering, and Feb., 1928, p. “just Locomotive And 37. what economy measure of by retaining yard is effected locomotives in work train after they service their condition has become such that longer capable are no performing assigned their duties in road service, apparent, say Railway Review, not least.” 1924— 74, p. replacement antiquated power Vol. 771. with modem switch-yards by locomotives in Ry. its the Seaboard Air Line is esti savings mated to have operating effected a pay costs which will an fifty annual return of per cent on the investment in the new engines. Railway Age, 83.1, pi 1927—Vol. Railway 45. See, also, Age, 209; Railway 79.1, p. Review, Vol. 75, p. Vol. “83 tendency There is patch up perpetuate too much an ob solete, inadequate and equipment uneconomical unit of rather than equipment purchase retire new to derive the benefit building.” advanced state of the F. Hardin, art in H. assistant in an failing revenues.84 Such excuse insufficient if might have been conclusive improved plant stall had been as the measure accepted. prudent investment management But the have may Value. fact free from use the in continuing been blame in wholly not to their actual value. parts obviously efficient does add difference value of an existing actual plant, and constructing a between its value and the cost present service, is modern will efficient which render plant of the ob use the same whether the continued precisely good or to lack of capital, solete was due to lack part manage of thé judgment, part on or somnolence v. New ment. As Board was said Commissioners Co., 271 32: “Customers 23, pay York U. S. Telephone service, render it.” for the not for the used property to. legal is of Only property the then service Ames. Smyth under rule v. significance It may urged depreciation also be that such functional de- of the railroad since 1914 is allowed for in the plant estimated preciation customarily Commission. Functional depreciation prior But not true. this is valuing when as of that date was included 30, 1914, June 81.2, (Railway p. Ry. Age, 1926—Vol. New York Central president, Society effect, American 671.) Transactions, see To the same 670, Railway Review, Engineers, 47, p. 179; 1925—Vol. of Mechanical 78, pp. 195, Vol. ... ,271. Pennsylvania Railroad, ad Rea, president in an Samuel of Commerce the U. Chamber eastern division of dress before the S. viewpoint are engineering there From said: an delivered' in present use adopted, or the many improvements couid be very materially extended, would greatly and which of which could be operation. railroad cost of efficiency and reduce the increase the require investment installations, however, would The initial sums see how these difficult to very large sums and it money, To 262, 263. Review, p. Railway Vol. can be ...” raised. Aishton, president, American effect, of R. H. see statement flie same Association, pp. 783, 1921—Vol. Railway Railway-Review, the then railroads. But property the instructions. of the Commission that functional provided depreciation after that date should not be considered arising unless “ imminent.” And the made clear that it Commission did not term to by the include depre functional intend ciation the character described above from ex arising causes, competition ternal from of new methods from the transportation, extraordinary urban growth, from the need of new economies from arising the largely increased labor and fuel and from other .costs, incidents of the war and post-war developments in industry transportation. Texas Midland R. R., 75 I. C. C. 1, 47-52, on Steam Rail Compare, Depreciation Charges 124-130. 5 roads, 118 I. C. C. 295.8 If is weight toTie given reproduction cost making valuation of any railroad for rate purposes making under. 19a 15a, § there must a § determination pf the functional depreciation the individual plant as with a efficient compared modern, plant adequate to per- same form the service. To make such a determination railroad involves a any detailed enquiry into the and condition of all character parts those of the plant value, which may have reduced functional because of the post-war changes affecting transportation above referred to, and also into the character and the volume of the car- rier’s business. For the efficient plant means that plant which is economical and efficient'for particular car- rier view of peculiar' requirements possibilities of its own business. To make a such justly, determination the Commission must have on data a compe- , tent and vigilant management would insist when re- quired pass upon advisability making capital Of ‘ 85 g. e. With account respect to Grading,’ No. appears of "grading the retirement contingency is a sufficiently' remote in most practicable cases so that it is not depreciable treat it as (118 property.” 362.) I. C. C.

expenditures. And obliged the Commission would be give them the same careful The determi- consideration. nation thus a depreciation the extent functional very serious far more than that task; task serious determining merely physical depreciation.

To make such determination of functional deprecia tion for each of the railroads of the United annually stupendous States be a involving perhaps would task, make prohibitive expense. necessary To decisions would other promptly impossible, among reasons, seem many is of the because railroad valuation but a small part of the On the other hand, adjust duties Commission. to through to render a fair and to return, provide rates so as in of aid the weaker rail the funds provision recapture deemed road,- Congress urgent; are tasks which if its purpose is be must be to promptly pérformed in Obviously Congress making intended that achieved. § 15a a method valuations under should be necessary the which it the imposed upon the task by which pursued England New Compare performed. Commission could the 197. Recognizing this, S. Case, Divisions U. of (f) had paragraph 15a as it § Commission construed to make a the Commission permitting as 19a. That is, § (June date of some general as basic valuation ,the contrary reason to unless and, good selected); was year thereafter any value to find the appeared, in the net from the 1914 value subtracting or to adding in devoted property in investment the or decreases creases from the carrier’s as determined service transportation to the element of regard deprec to due with returns annual iation.86 “86 the provided for herein of the valuation completion Upon the of informed keep itself like manner thereafter in shall Commission changes in condition the other improvements or extensions and all ascer and shall carriers, common of property all the of

and value time, cor- to revise time and shall from thereof value tain the current Eighth. The connection with significance, 15a requirement § the value of that costs, reproduction ” de- there making purposes for rate be ascertained of railroads, when position becomes the apparent fined of most with that local utili- compared in this is respect, of life. The fun- necessary of enjoying monopoly ties Bell one the Southwestern case question was 'damental Is namely: rate- law, constitutional substantive Constitution to a guarantees public on which base a fair earn return the actual value right utility or hearing at the time the rate is it the property enterprise? invested prudently capital cost or . the actual that the rate-base is value at decided

Court That rate substantive hearing. proposition of the time undertook to apply Commission facts pre- law the bar. that Recognizing in the case at evidence sented costs admissible for the pur- increased.reconstruction than greater an actual showing original pose it found the prudent investment, respect cost or property the carrier’s evidence of en- some was persuasive cost higher pres- reconstruction hanced As the rest property, value. held ent nor adequate persuasive. was neither evidence utility the local it is and under true, both railroads Of the Southwestern law in adopted of substantive the rule sum is the on which a Bell that value fair return case, consistently with the laws of trade earned and' can be the operative scope But upon rail- enactments. legal imposed upon so the of the limitations and rates, roads valuations, showing such revision correction its classified and rect separately in each of the several States and Terri- a whole as valuations, original of and the District Columbia both tories reported valuations and shall to corrected, tentative be shall be regular Congress each session.” beginning of at “ Beutel, Pub- Due Process in Valuation of Compare Frederick K. Utilities,” Law Review lic 13 Minnesota 426-427. of is than the case values, greater

hence much in upon constantly local utilities.87 Rail rates are curbed being of and of trans- by competition markets rival means of of Rail are the influence portation. by rates curbed also ' the desires of individuals. high upon public rates The If do rail extent, a considerable without service. to can, falls Thus, are excessive traffic off. pas- rates when is or high are too travel either curtailed rates senger other means But employ transportation. people in a company a local water by populous rendered service every inhabitant. practically indispensable is city taking for water and to escape can be no substitute There for an impossible; is alternative practically service rarely available. supply is Even common means in establishing prices business incentive low order of sales absent; induce an volume is since the enlarged a not by volume of the done water will company business affected or raising lowering appreciably quantity far as water is used except so rates, In other the commercial manufacturing purposes. words, rates —what the traffic will bear —is upon limitation of such a local monopoly. extent the case absent large, as the water user must submit to such rate's city The they legis- are impose, unless curbed utility chooses to enactment. lative (so rates case potent limitations legal upon inoperative in the the case railroads) main, are, rates held Rail are sometimes company. a water

such greater than the exaction because the illegal There is in fact no correspond- shipper. service .the charge small, rates. The- water is so ing Upon limitation which would be inconvenience .compared with ” counsel, Craven; Leslie Compare Valuation Railroad Conference Committee on Group, Presidents’ Western [Railroad] .681, Journal, Railroads, Amer. Assn. Bar Federal Valuation 683, 684.

suffered the doing service, without the worth to rarely the water taker be could doubted. The prohibition against discrimination or persons, articles places, which so commerce, frequently interferes to rail prevent roads from charging higher the traffic rates, although easily would bear no them, protection city water .affords and causes users; seldom loss of revenue to the water There is company. respect the water rates no pro comparable hibition to that embodied in the long haul has short clause, an important effect limit rail rates. under the rule ing Hence, substantive law declared the Bell case, Southwestern practically limitation only imposed upon water rates is the denial to utility of rates which will an yield excessive return upon the actual value of property. In applying rule of substantive law, the then actual cost reproduc ing plant would (assuming it be efficient) com monly persuasive evidence of its actual as the value, cost of reproducing current the vessel was held to inbe Standard Oil Co. v. Southern Co., U. S. Pacific It in the is true that Southwestern Bell case the Court passed upon subsidiary question also v/eight a. —the effect of the of reconstruction cost. But evidence question adjective law arose upon yery record differ- ent from that the case at bar; the action of the entirely Commission here consistent with that decision. In case Bell direct testimony Southwestern as to the property then value was The efficiency introduced. unquestioned. was had plant Witnesses testified both to actual cost of constructing identical property time; at that and that specific under property con- sideration was worth at least more than the estimate 25% of the state commission. The Court believed those wit- nesses. this Concluding that direct and uncontradicted had ignored by evidence been be- state commission 538 law, of error as to the rule substantive governing of

cause confiscatory, rate order saying:, Court set aside the as this “ the that for the of proof purposes think the shows We $25,000,000.” at case the valuation least present should 288.) (262 U. S. of the Commission in the at was

The action case bar Co., Water Indianapolis McCardle v. with also consistent Works Public Water Co. v. S. U. Bluefield Commission, 262 U. S. Each of these water Service a local of an monopoly indispensable enjoyed companies In a provide community order to the substitute, service. utility’s emi property by have either take would so, if free to build a it was do domain; or, competing nent no commercial limitation practically There was plant. water companies these upon earning power except practically no market; legal extent of local that the rates requirement charged except limitation an yield not be as to excessive return high upon should so utility’s property. current the actual substantially a like the constructing plant then cost efficient) persuasive it would be (assuming to be utility’s For con upon its actual value. issue, evidence would enquiry natur monopoly, a local water cerning community much it cost the to sub would be: How ally monopoly publiely plant? owned private stitute for a railroad reconstructing of the cost built But evidence above, in for the reasons stated be no might, before making value for rate post-war whatever its dication And as case where, bar, at § under 15a. purposes may the evidence be considered force of the probative the rule confiscation, declared question free from any Avon, Ben 253 U. Valley Ohio Water Co. v. S. judicial determinar in confiscation cases requires apply. does not evidence, weight on the tion requires con- construction question A further Ninth. if even Commission that, suggested It is sideration. level when higher price to the effect give required is not 15a, Under § making purposes for rate values finding income of the excess the amount fixing do so when must under para- railroad a particular from recaptured to be affords a of the section language 18. The 6 to graphs The valuation pre- contention. to that short answer purposes be for the declared paragraph scribed well purposes is, recapture for ’’—that of this section 6, which provides And making. paragraph as for rate railway- “The value such declares: the recapture, in Commission by determined shall be property (4).” in paragraph mánner provided and the of excess establishment earnings The recapture establishing of the such process are a part reserves rates (or as a in a whole whole each . that carriers as

“. . may as the Commission or territories- groups such rate will, honest, under efficient designate) to time from time an-' aggregate earn an . , . management and economical may as nearly income operating railway equal', nual net of the rail- aggregate upon fair return to a be, used in the for and held carriers of such way property 2.) (par. transportation.” service of made readjustment are the and reserve recapture necessary: “ (without regulation is impossible Inasmuch as it the United the commerce of interest of control in the uniform rates whole) to establish States considered 'S a adequately which will sustain traffic upon competitive in and which all are such trafile engaged the carriers which they to which render are to the communities indispensable without enabling some transportation, the service of railway operating a net income such carriers to receive in unreasonably excess a fair return substantially and railway held for and '\pon.the property valúe of their hereby it is transportation, vl the service declared us. that carrier which receives any such an'income so excess of a fair shall hold return, part excess,- such as here-.. inafter and shall for, pay as trustee .prescribed, it-to, 5.) United (par. States.” here challenged the direction the order

Thus, pay. 6 per or reserve the excess over cent of the amounts earned Ex from 1920 to 1923 established pursuant rates Rates, 1920, 58 C. parte 74, merely Increased I. C. a readjustment those rates.

. question Tenth. The remains whether Commission, valuing acquired structural before June property 30, 1914, give its discretion effect declining abused to the evidence of reconstruction cost.88 The enhanced Commission, O’Fallon fact, adopted insists that mathematical that it declined to determine the formula; present property value of the in accordance with carrier’s “ Ames, Smyth and rational rule of under flexible v. of judgment matter determined which valuéis a ”; of all consideration relevant facts circumstances “ of its own based on arbitrary an standard it erected. consideration to given no if it had facts”; relevant including as one its circumstances, all relevant facts found prices, at current the value of reproduction cost its ”; pri- and that substantially higher been must have amount of the invest- to determine the was mary purpose, in_the short, In the O’Fallon carriers’ property. ment value; to find actual refused that the Commission asserts investment. prudent found the instead, report the challenged is described in the order here The nature of in mind that is to be borne the outset it accompanied it: “At . as lawsuits. No properly be treated proceedings no sense can these controversy dis no between There is parties. is issue raised between rights. .They purely are its. protection contending for putants, each following direction of we the are proceedings wherein administrative used furtherance of contingent fund to be Congress to create a Income St. transportation.” Excess railway public interest 1, Ry. Co., 124 7. I. C. C. Louis and O’Fallon assertion, In of this O’Fallon support points to the report statement valúe of the property for of railroads rate-making «purposes . . . approaches the reasonable and nearly more necessary investment than the property reproducing cost it aat particular time.”- 41.) The statement (p. just quoted does not the Commission accepted mean that prudent investment as a measure of value. It means merely that the Com- deemed the mission estimated original cost a better indi- cation of actual value than the estimated reconstruction Bell cost. this Court declared Southwestern While in the that prudent investment is not to be taken case as the value, measure of has never held that prudent invest- may ment be accepted not as evidence of or value, finding value is if necessarily erroneous it happens nearly to be more coincident with may what be supposed to have been the cost of the than with property its esti- reproduction mated cost. The single-sum values found by the Commission do not coincide either with the es- investment or prudent timated with the estimated recon- They struction cost. much are nearer the estimated origi- nal cost of the property they are its estimated re- than cost. But the production values found not do conform to any formula.89 single-sum The O’Fallon has calculated that values found recapture periods for the several by $32,660.88

the Commission exceed following (1) sums reproduction .of amounts: the cost of less depreciation, 30, 1919, property June of all exclusive of lands working capital pre-war 1914 or prices; (2) at the amount property which the actual of the installed July cost between 1914, reproduction and June 30, exceeded its cost of prices; at 1914 (3) present land; (4) of the the allowance working capi tal; (5) the actual investment in additions and betterments, less re subsequent to June tirements, correct; calculation is $32,660.88 (which but the assertion that is about 5% of the aggregate amounts) must have other been allowed as overhead in the record and is without foundation inconsistent with statements report. in Commission’s the Commission in pursued by method general resembles that closely approved

reaching its conclusion Railroad Georgia Ry. & Power v. by the Court Co. 625, 629-630. It that the Commission, appeared 262 U. S. June long prior had been constructed to O’Fallon Railroad “ the of re- had before it cost 1914. The Commission 30, of this portion property new the structural production coupled of our unit prices, on the basis estimated reproduction that costs of arrived knowledge so with the from As original costs.” greatly were not different at parts the value those the Railroad’s bearing upon Commis- added or later the replaced which were property bearing cost. As on the then value had actual sion adjacent values of lands. land it had current of the railroad railroad and the character concerning It evidence had traffic, revenues and working capital, volume its of increased levels after price It had evidence expenses. reproduction during of current costs and estimates periods. the recapture had physically property insisted that

The carrier urged depreciated; more' than had appreciated of value the basic measure to take as Commission to the exclu- prices new at current of reproduction cost least of everything or at everything else, sion of (124 28.) value.” I. C. C. This tend to lower might in- It full effect to gave declined to do. the Commission determining the value market values current creased betterments made the additions and It gave the land. cost their less approximating a value 30, 1914, June after respect to structural But, depreciation.90 physical “90 logical proper find which we therefore The method recapture subsequent periods is to add determining the value in the the net increases or decreases from the 1919 to or subtract transportation service as de property devoted investment valuation order No. with returns the carrier’s from termined depreciation.” 124 C. C. passim, I. regard the element due pp. particularly

property equipment acquired 30, and June it 1914, before declined to give weight to the evidence' introduced show current than reproduction greater costs those of concluded, despite It the of higher 1914. estimates re costs, that, for additions, construction the the except actual value of this the O’Fallon Railroad had not part increased; it found sum single and the rate making in 1920 purposes 1921, $875, be in $856,065; $978,246. 360; $978,874; The Commission as recognized, Minnesota stated Cases, 352, 434, 230 U. the Rate S. that determination “ matter of must formulas, value is not a but there be basis in reasonable its consid- judgment having proper eration of & Power Georgia Ry. all relevant facts.” Co. Commission, It v. 262 U. S. states Railroad “it and the weighed carefully, light that considered knowledge experience, fact, of its own circum- each on behalf of stance and condition called to its attention ” introduced; as as the evidence otherwise the carrier well of information we that “from this accumulation the fair judgments single-sum formed our as to basic have formula any use of after considera- values, not but facts.” makes clear that report The of all relevant tion judgment upon result of exercise of an finding its was to the evidence; the Commission accorded all the probative all the force cost reconstruction evidence on the entitled issue it that evidence deeméd which considered, bearing as upon it value; and actual repro- and the estimated cost value, only probable not carrier, its descriptions also cost, but duction its operates, history, it which territory traffic, of 25.) (p. operation.” results of its summaries Commission was con- difficulties evidence repro- to apply requested when fronted In the first hardly exaggerated. can cost duction . did it was of such a character that the evidence

place, establish have been satisfactorily what would not pe- reproduction during recapture current cost of question here in was During years prac- riods.91 there construction of new lines.92 the current tically Thus, no cost for those had years to be reproduction obtained the basis for a figures guess index as to what using give then railroad. cost to build the identical To would cost of 91 Asto the evidence the Commission said: use of “.The practical is means free from difficulties. For no reproduction here shows that there was a dearth of reliable example, the record which an estimate of such cost could be made data from accurate period proof for the 1920 to 1923. In of this assertion reference need only upon data relied witnesses be made to the sources of the Their estimates those both for the bureau and for the carriers. for years large part upon were founded in manufacturers’ records and price appearing publications, statistics in various and to a lesser ex actually upon tent cost of incurred railroads in that construction very period. was, fact, construction in There little new railroad years. those “ Synthetic reproduction upon estimates of cost of based statistics showing price wage changes improved do not make allowance assembly methods of As will hereinafter be more construction. fully indicated, supra, Texas Midland Railroad, we found in I. [75 page 140, that the increase in the cost of labor and C. C. at ma 1] largely by improvement terials between and 1914 was offset may off the art of construction. How far there have been a similar period concerned, far from so as costs in the 1920-1923are is not set, (p. 29.) disclosed of record.” 41): (p. reproduction

And later . even if “. the cost new . regarded controlling 1920 were a element is not in the as there present showing might' repro- record evidence what it have cost to property only duce the at that time. The evidence O’Fallon respect general prices in this that of the relation recapture years.” in 1920 and the other 92Compare Boston, Cape United States v. & York Cod New Canal Co., 877, 889, jury 271 Fed. Court said that should where the upon question not consider the evidence of reconstruction cost they value, reasonably prudent unless were a satisfied that man purchase property would or at undertake the construction of the figure,” such effect what then have proving

to such it would figures OTallon as- Railroad, it must be reproduce cost to there had not been introduced since June sumed that 1914, new methods construction which cost-saving overcome, in'whole or in the effect of part, would level higher upon reproducing the iden- price cost This, experience, in view of its the Com- tical property. In mission declined to do.93 the second properly place of evidence to what if extent, there was. a lack to show cost, in the any, reconstruction several higher recapture than periods, implied higher that theretofore pre- The Commission believed that ist act vailing:94 could only on proof; required it was not or permitted base on findings conjecture; and under the assign, evidence of circumstances, any weight reconstruc- tion conjecture. cost would he mere

Moreover, Commission had, through its valuation special department, knowledge of the property this car- necessarily rier. It had acquired performance of its many the general duties knowledge, already referred to,

“ 93 Costs of railroad buildifig, owing improvements to in methods thereby vary greatly economies effected,, during pe and did not the years preceding 1914, although of 20 prices riod the of labor and ma7 testimony terial is no fluctuated. There here as to how much it cost any build any part any recapture or substantial railroad of one in periods, impossible comparison and for that reason it is make a periods. of costs ih the two It is assume, not as the O’Fallon safe assumed, has building that costs of railroads have varied in recent years in direct gen ratio to the variation in costs of commodities in use, eral generally. fallacy of in the costs of materials or labor The basing reproduction upon price clearly cost curves ratios .is indi or cated the 41.) introduced (p. tabulations the carrier.” “ says (,p. 40): The Weighing Commission figures previously the light record, mentioned in the of these considerations and the entire viewing and the operation carrier as a common carrier in successful and with an established we conclude that the for rate- business, value making purposes property of the entire common of the carrier 30, on 1919, O’Fallon June 1850,000,” was conditions and transportation

concerning changes great and knew how was their in the it art; the advances The of railroad property. the actual values upon effect been Railway having finally not value of O’Fallon the obliged by it 19a, paragraph ascertained under was § its under section investigation utilize the results of available.” The far deemed itby 19a of in so as this Act showed, recapture in the proceedings introduced evidence locomotives in the among the five things, other that been built 1920, one had December service, 31, O’Fallon’s 20.8 average age that their was early as as and outlays additions aggregate also that years; retirements, had in small railroad, in the less betterments The did O’Fallon years only $98,148.25. eleven been bearing de- any upon evidence functional not introduce rea- The Commission property. may preciation had if there been have even sonably that, concluded during cost, evidence persuasive introduced plant new the recapture reproducing identical periods, in the still the general price rise level, approximated O’Fallon existed June Railway, actual of the value de- increased, had the functional not because that date plus physical depreciation since preciation might have been fully what otherwise counterbalanced plant. of the higher urged large during The O’Fallon its net earnings fully and earlier established recapture higher periods value, independently reproduction evidence of cost. of the character ignores peculiar This contention which is owned by Railroad, Adolphus property. operates family wholly Illinois, Busch lies estate main line from two coal mines also owned about 9 miles of the Termi- to the tracks of family, the Busch estate and are miles of St. Louis. There nal East Company the Busch mines. While largely at yardage tracks, located carrier, actually a common Railroad is is legally reve- per of its Ninety-nine cent railroad. an industrial coal; carriage directly from derived are nues to come half about per cent, appears one remaining of the the Busch coal made by $300 a month from payment mines. to and its miners from carrying its company a sub- mines there is from the Busch coal Besides the long carried under a amount diminishing but stantial, road, an located on electric mines contract, from two time which crosses Railway, Louis and Suburban St. the East from junction it carries This coal the OTallon. East Ry. Co. v. O’Fallon Louis & See St. Louis. St. East Obviously Co., I. 81 C. C. Ry. Louis & Suburban St. dependent is wholly property of this railroad mines. upon operation operated four continue to be

How mines will long is sub Their product uncertain. entirely was and still mines bituminous coal ject other competition to the rail in all on other which are located These, Illinois. v. Perry Louis. See Coal Co. low rates St. roads, enjoy R., 5 Illinois Commerce Commis & Southern R. Alton The vicissitudes of coal the diminish mining, sion 461. fuel since the war because of increased use of coal ing of oil as ánd the competition fuel, growing efficiency, power are matters common knowl hydro-electric use of operations the diminishing during as are recent edge; the Illinois coal mines as with the years compared Moreover, non-union in territory.95 ih the decline mines traffic, the reduction in coal the volume rates made C. C. Rates, 1922, Reduced 68 I. growing and the of the carrier expenses due increased payroll, put were In evidence it. view of these facts, the Commission justified to find clearly refusing was the Railroad higher had a value than in 1914, although the earning net Geological Survey: 1923,” pp. 528-535; 95 See “Coal Bureau “ 1924,” p. 460; of Mines: Coal Coal in 1925,” pp. 394-398; 1926,” 420-431, “Coal pp. 443-461. showed reported a return for the earlier period averaging cent per upon the amount claimed as reproduc /2

71 tion cost. Court

This has no concern with the correctness of the Commission’s reasoning on the evidence its making of findings fact, since it applied the of mies substantive law prescribed by Congress and reached its findings of actual the exercise of its judgment upon all the evidence, including enhanced constmction costs. Vir- ginian Ry. States, Co. v. United 272 U. S. 658, 665-666; Assigned Cases, Car 274 U. S. 580. We 564, must bear mind that here we are not dealing with a question of con- that we fiscation; are as was dealing, pointed out Smyth Ames, v. 169 U. S. with a legislative ques- tion cpmmis- which can be more easily determined aby sion composed whose persons special skill, observation qualifies them so experience handle great problems justice as to do transportation both to the public and money whose has those been used to construct and highways maintain for the convenience and benefit of the people.”

Mr. Justice Holmes Mr. Justice i join Stone opinion. thisn

Dissenting opinion of Mr. Justice Stone.

I Mr. agree with what Justice Brandéis has said and only way emphasis add word those aspects sufficient, the cáse which to me appear apart from all to sustain the finding other the Com- considerations, mission.

The of the Interstate Commerce report Commission is aside on the sole rejected ground and its order set (a) § under Interstate recapture proceeding failed to consider present reproduc- it has Act, Commerce property so to appellant’s “'give cost or value of tion recognized of value to all the elements due consideration No making purposes.”. land for rate the law question is involved. constitutional railroad, to value a upon was called Commission had line miles of main track, less than nine

with 1900. Much its equipment prior been constructed being part a considerable was purchased before on dependent very largely Its traffic was second hand. it served. coal mines which the of a few output it had before the Commissibn In its performing task new of structural appellant’s of reproduction the cost " with of 1914 unit prices, the basis estimated on property, , of arrived reproduction the costs so that knowledge the It from the costs.” original different greatly were not at additions and of actual cost of later the had evidence railroad condition of the of the physical replacements, volume and sources of character, of the equipment, and ex- revenues and capital its and working its of traffic, through its valuation department, It possessed, penses. of property of this carrier. knowledge special it had the of an ex- experience its own benefit Through factors value of rail- knowledge affecting, of all the pert of in methods of trans- growing changes out way property transportation appliances of improvement portation, consequent existing equipment, obsolescence of and the in methods of of railroad construction improvement Although reductions cost. it had estimates consequent costs'in figures construction the form index present comparative general price based on levels labor *,f and materials fcr 1914 and each. the recapture years, it considered and discussed its there report, no evidence before it of actual present was cost or other or any construction this railroad affirma- any showing appellant’s tive if road was to that, be built and. anew, railroad competent engineers deem equipped would equipment for or adapt- suitable present structure contem- management able to the efficient economical and plated statute. above

After that it had before it the evidence stating outlined, and such including reproduction cost, other bring matters the carrier desired to to its atten- the Commission From accumulated in- tion, added, this formation we have formed our as to the fair judgment basic single sum not the use of any formula, values, but after consideration of all relevant facts.” That gave Commission consideration to present reproduction costs from appears only not its own but from statement, full fact that it effect gave to increased current mar- ket values the value of determining land to addi- tions and betterments since June 30, 1914, taken at their In depreciation. cost less of those light considera- present appellant’s tións which affect the value struc- tural which Mr. Justice Brandéis mentioned, property has I cannot say Commission did not have before data requisite forming trustworthy judgment road or that it failed to appellant’s give of cost all the proof reproduction weight to which it was entitled on its merits. Had the not Commission aside to out in point report turned its the economic falla- of reproduction cies of the use cost as a standard of value for rate which it making considered purposes, nevertheless T extent-applied, suppose and to some it would have not question validity occurred to to of anyone its order. I cannot avoid the conclusion that substance the ob- jection, to the order of the upheld, now Commission is give not that it to consider or appropriate failed weight to of cost reproduction evidence of present appellant’s weight road, but that it attached less to present construc- it adversely tion costs than other factors before affecting to structural property. value of the That present this objection was the real nature of the voiced the dissent- to me from apparent opin- Commissioners seems their ing

55Í of Southwest as result assume to that They ion. seem Comm., 262 U. S. Service Public ern Tel. Co. v. of as a matter Commission Court,

other in this cases that find circumstances, any under may never, law not exceed does railroad of a part value the structural has if the Commission date, earlier its fair value an costs. construction increased it of later before evidence a rail land,” in valuing of the under the law They say legal weight accord 15a “we must road under § material, labor enhanced cost to greatly sense in the Weight during recapture periods. supplies” to be not accorded evidently taken legal sense by some rule judgment imposed positive but an informed of law. and other data the- evidence

Without discussion Commission, received the consideration Court seems on the broad as- proceed this opinion relied mere esti- on, synthetic that the evidence sumption certainly must reproduction, so mates costs affecting all other considerations necessarily outweigh of the Commission to set require values as to order be required In Commission is give effect the aside. index an evidential to which it figures points such applied are not entitled when railroad they prop- out in particular, or to this' one arid so general this, erties investigation far without of the soundness appears, of the reasons them. rejecting Commission This present Court has said that reproduction costs be value for ascertaining making must considered rate But has not said such purposes. evidence, when considered, fairly may outweighed by other not con- siderations value, any or that affecting evidence of pres- ent reproduction costs, when with all the other compared value, factors affecting must be a given weight which judgment it is not in the of the entitled tribunal “informed ” “ ” by by the experience appointed law to deal with Central, R. Illinois &c. R. very presented. now problem Commission, v. Interstate rce 206 U. Comme S. ” if the weight legal given But in sense must to evi be dence of cosh;, by judgment const notion now present given we do not rule will inform lay any legal down much full weight, effect, Commission how short its to the exclusion of all is to considerations, given other be synthetic in the evidence of costs of construction valu If ing given a railroad full were to be property. effect then, it in all Commission out points cases as the its Com valued country, by railroads report, had dollars, mission 1920 at nineteen billion would have of forty value billion dollars year reproduction that economic that paradox and we would at arrive any far excess of amount may of the railroads value If a return. less than full effect they could cam on which without de it is for me to see given, how, bemay difficult could Commission principles, from established parture .already weigh it has done —to do than be asked to more all considerations —or proper guided the evidence rest, which its findings may upon if is evidence how, there of the Com for that judgment our substitute we can “due consideration” I is the Such, believe, mission. “ all of value the elements requires statute which the for rate making pur the land the law of recognized poses.” construction that increased say priori I

As cannot elements offset other more than not be may costs of appellant’s prop- affecting present adversely the Cdmmissión before there was evidence erty, judgment that the only conclude I findings, its can support case, In any view of the affirmed. should be below all it considered rele- the Commission statement brought of value to its the elements facts, including vant have supposed I not carrier, should by the attention some order without present aside rightly set could we value of the evidence consideration of the probative Commission dis- costs which the pres;rd reproduction length report. cussed '-it its Mf„

. concur Mr. Justice Brandéis Holmes Justice in this opinion. COÖPERATIVE CALIFORNIA

UNITED STATES v. CANNERIES. May 20, April 1929. Decided Argued

No. 375. General Wheat, whom Solicitor with A. Mr'. Alfred Donovan, and General Mitchell, Attorney Assistant to Attorney to the Assistant Special B. Mr. H. Teegarc¡¡en, for the United States. were on the General, brief, Hogan Frank J. whom Mr. Harison, with Nelson T. Mr. . brief, respondent on the was

Case Details

Case Name: St. Louis & O'Fallon Railway Co. v. United States

Court Name: Supreme Court of the United States

Date Published: May 20, 1929

Citation: 279 U.S. 461

Docket Number: 131 and 132

Court Abbreviation: SCOTUS