39 N.W.2d 752 | Minn. | 1949
Lead Opinion
We are primarily concerned with the fundamental issue of whether, in the light of the evidence actually adduced beforethe commission and the district court, the maximum rates established by the commission are unlawful and unreasonable and constitute a taking of the property without due process of law in violation of Minn. Const. art.
We are not here concerned with interstate traffic shipments which are unloaded directly from a river barge into a car or directly from a car to a barge, but solely with river-traffic shipments — such as cargoes of coal — which have come to rest on the docks of the barge terminal, or have there been stored, and are subsequently loaded on rail cars for intrastate haulage to consuming industries *316 located within an area designated by the commission as the St. Paul switching district (a district encompassing several points designated by the carriers as separate stations, although they are [with certain exceptions such as North St. Paul, South St. Paul, and Newport] all located within the city of St. Paul),and of return shipments from such industries to the barge terminal docks for storage or to industries occupying barge terminal space as tenants. At the time of the hearing, the barge terminal had two industrial tenants.
The Port Authority of the city of St. Paul, a municipal commission created in 1932 pursuant to statute (M.S.A.
The other outlet is over a 158.2-foot track which connects the barge terminal trackage with the line of respondent Chicago, Milwaukee, St. Paul Pacific Railway Company (hereinafter called Milwaukee). This short piece of track, owned by Milwaukee and located on its property, was originally built by Milwaukee in 1931 — but paid for by the city of St. Paul — in compliance with an order of the interstate commerce commission issued in accordance with 49 USCA, § 6, par. 11 (formerly par. 13), upon the complaint and request of said city.2 For the sole purpose of convenient designation, we shall herein refer to these 158.2 feet of track as the crossover *317 track, although plaintiffs contend that such a designation is a misnomer, in that it actually is nothing more than a switch track. Plaintiffs point out that it is not a main line track and does not cross the tracks of other carriers.3 Labels of identification are not determinative of the nature of the object to which applied.
These proceedings were begun in December 1943 upon a complaint filed with the state railroad and warehouse commission by the Port Authority. A similar complaint was later filed by the attorney general of Minnesota. Both matters were joined and tried as a single proceeding. The complaints, which alleged the rates established by defendants for intrastate carload traffic from the barge terminal to industries within the so-called St. Paul switching district to be unreasonable, unequal, discriminatory, and unlawful, requested the commission to investigate and make a tariff of rates to be substituted for those of which complaint was so made.
Pursuant to the hearing, the commission made findings of fact whereby it found that the existing rates were excessive, unreasonable, and unduly preferential to certain shippers, and further found certain designated maximum charges to be reasonable. Upon these findings, the commission ordered defendants to substitute for their former tariffs the following maximum rates:
(2) $4.40 per car for the movement from points on the barge terminal to industries on the tracks of the so-called South St. Paul terminal (also known as the Bridge Terminal) of the Great Western.
(3) $7.87 per car for the movement from points on the barge terminal to industries on the tracks of the Great Western ($4.40 plus a switching charge of $3.47). *318
(4) $7.87 per car between points on the barge terminal and industries on the tracks of any of the following:
(a) Chicago, Burlington Quincy Railroad Company; (b) The Milwaukee line; (c) Chicago, St. Paul, Minneapolis Omaha Railroad Company; (d) Chicago, Rock Island Pacific Railroad Company; (e) Great Northern Railway Company; (f) Northern Pacific Railway Company ($4.40 for the movement from the barge terminal to a connecting line plus one switching charge of $3.47 for the switching road).
(5) $11.34 per car from points on the barge terminal to industries on the tracks of the Soo Line or on the tracks of the Minneapolis St. Louis Railroad Company ($4.40 for the movement to the connecting line plus two switching charges of $3.47 each for two switching lines).
(6) $11.33 per car from points on the barge terminal to industries on the tracks of the Minnesota Transfer Railway ($4.40 plus a Minnesota Transfer switching charge of $6.93).
After service of the commission's order upon them, defendants appealed to the district court from the order and moved the court for an order staying the commission's order pending the appeal. Upon appeal to this court from the district court's order granting defendants' motion, we affirmed such order. See, State and Port Authority of St. Paul v. N. P. Ry. Co.
The district court, after a hearing in which certain new evidence was received and considered in addition to the evidence presented to the commission, vacated the order of the commission as unreasonable and unlawful, in that the rates thereby established were confiscatory and also on the further ground that the commission specifically had no jurisdiction to regulate rates over the 158.2-foot crossover track of Milwaukee or to compel Milwaukee to make said crossover track available for use by other roads. On July 15, 1948, an appeal to this court was taken from the judgment of the district court. *319
1-2-3. The power to investigate and regulate railroad rates involves a legislative and administrative function which is exclusively vested by statute in the railroad and warehouse commission. §§
"The lawfulness and reasonableness of the commission's order is to be tested by whether it kept within its jurisdiction, whether in arriving at its decision it was guided by the controlling rule of law * * * or acted capriciously and at pleasure, and whether the evidence fairly supports the findings on which its conclusions rest." *320
4-5-6-7. In discharging its purely judicial function of determining whether the rates and regulations established by the commission are lawful and reasonable, the district court is governed by the statutory rule (§
"But this judicial duty to exercise an independent judgment does not require or justify disregard of the weight which may properly attach to findings upon hearing and evidence. * * *Judicial judgment may be none the less appropriatelyindependent because informed and aided by the sifting procedureof an expert legislative agency. * * * We have said that 'in a question of ratemaking there is a strong presumption in favor of the conclusions reached by an experienced administrative body after a full hearing,' * * * The established principle which guides the court in the exercise of its judgment on the entire case is that the complaining party carries the burden of making a convincing showing and that the court will notinterfere with the exercise of the rate-making power unlessconfiscation is clearly established." (Italics supplied.)
8-9. In proceedings pursuant to §
In determining whether the district court erred in vacating the commission's order as unreasonable and unlawful, in that the rates established were confiscatory, we turn to the evidence as a whole. After first recognizing that a current field study of costs could not be made because of war conditions, the commission by its findings rejected as distorted and as not portraying conditions or costs of operation at St. Paul or elsewhere a prior field study made by Glen F. Vivian, a witness for defendants. Vivian's field study of St. Paul switching operations, based on the so-called Saur-Coverston formula, had been made for defendants in 1933 (with the exception of a field study for the Bridge Terminal of Great Western in 1937). This field study was factored or adjusted by Vivian to the year 1944 to reflect changes in wage, material, and other costs. The field study so factored was then applied to an interstate traffic volume of 1,154 cars which in 1940 passed, with respect to the Federal Barge Line, between the Port Authority and the industries in the St. Paul switching area. Such interstate traffic volume was, according to Vivian, selected because no intrastate traffic volume was available to which the results of the study could be applied, and for the further reason that the year 1940 came nearest to being a normal year not distorted by wartime conditions. After refusing to give any consideration to the result of Vivian's study, the commission, in indicating the basis for its findings and order, said:
"The Commission must therefore be guided by a comparison with existing rates and charges on like services or what has been found reasonable by this and other regulatory agencies in the past."
As a basis for its findings, the commission then turned to cases wherein the interstate commerce commission (herein called I.C.C.) had theretofore established certain rates as reasonable for similar services. These I.C.C. cases involved Des Moines, Iowa, and certain rate-fixing decisions in the St. Paul switching district. We shall first consider the Des Moines Union Switching case (Des Moines Union Ry. Switching, 231 I. C. C. 631), wherein certain switching services are similar to those of the instant case with respect to *323 switching movements from points on the barge terminal to a connection with a connecting line either over Milwaukee or Great Western (see commission's rate schedule, supra). An examination of the Des Moines decision reveals that I.C.C. analyzed and determined the charges necessary for each type of switching service to cover the cost of the service plus a reasonable return on the investment. (231 I.C.C. 670.) Included in the analysis are certain intermediate switching services which are not analogous to any of the switching operations for which the commission herein ordered a rate of $4.40.Intermediate switching pertains to switching performed by a carrier which neither originates nor terminates the shipment and which consequently is not burdened with the extra work and expense incurred by an originating and terminating carrier by way of shipment classification and in the delivery, return, and spotting of empty cars. (See, 231 I.C.C. 670, and footnotes on pp. 631, 632.) The I.C.C. figures for Des Moines clearly demonstrate the materially lower cost of intermediate switching. Obviously, we must confine ourselves to the services at Des Moines, which are comparable to those of the instant case, namely, to connection terminal, intraterminal, and interterminal switching. For these analogous services at Des Moines, I.C.C. established rates of $4.85, $6.50, $7.20, and $7.40, which, as applied to the total number of cars moved at these various rates, gives us an average rate of $5.78 as compared to the lower rate of $4.40 ordered by the commission in the instant case. Although it may be contended that an average of the costs based on only a part of the movements within a switching unit is not wholly accurate, it does come substantially nearer to the actual cost than an average which is distorted from an inclusion of services which are wholly dissimilar. The commission also failed to take into consideration that the costs at Des Moines were computed for the year 1936 and that they were not factored to reflect the change in price levels for 1944. The Des Moines yardstick not only fails to sustain the commission's $4.40 rate, but, with respect to the services which are analogous, demonstrates such rate to be unreasonable and inadequate. In this respect, *324 the district court found correctly when it held that the Des Moines Union switching costs are not comparable to switching costs in the instant case and that the switching movements are not the same, with certain exceptions already noted.
Aside from the I.C.C. cost and reasonable return analysis at Des Moines, the commission based its $4.40 maximum charge directly upon the present interstate maximum rate for switching movements from the St. Paul barge terminal to connections with connecting lines or industries on the Bridge Terminal tracks. I.C.C. in 1929 (Switching at St. Paul, 159 I.C.C. 189, docket No. 3285) ordered a maximum interstate rate of $4, which in 1938 (Fifteen Percent Case, Ex parte No. 123, 226 I.C.C. 41) was increased by ten percent to $4.40. On their face, theinterstate and the commission's intrastate switching rates are identical, but when the material element of per diem is taken into consideration we have a substantial difference.7 In 1929, when the $4 interstate rate was ordered by I.C.C., Bridge Terminal was an independent switching carrier which was not owned or controlled by any other carrier. When the interstate rate was originally established (docket No. 3285), Bridge Terminal did not own any rolling equipment except locomotives, and it did not pay any hire (per diem) on stock cars of other carriers. (Switching at St. Paul, 159 I.C.C. 189, 192, docket No. 3285.) Since July 1934, when the Bridge Terminal system was leased to Great Western for operation (followed by a purchase of the system in 1941), Great Western, pursuant to I. C. C. regulations, has been required to pay per diem in behalf of Bridge Terminal for the use of the cars of other carriers. This change in situation was at once recognized in 1934 by the Federal Barge Line — an interstate line-haul carrier — which then agreed to pay a per diem reclaim to the Bridge Terminal unit of Great Western. *325 Taking the view of the evidence most favorable to the commission's order, the average per diem reclaim paid to Bridge Terminal on cars switched for the Federal Barge Line over Bridge Terminal in 1940 amounted to $1.87 per car. There was testimony to show that the total average per diem reclaim paidto all carriers in 1940 by the Federal Barge Line was $3.05. In the instant case, the commission, after refusing to give anyconsideration to per diem and per diem reclaim testimony, established a flat rate of $4.40. There is no evidentiary basis for an assumption that the loss of per diem reclaims is offset by demurrage charges. As a result, if the commission rate were to go into effect, Bridge Terminal, on an intrastate car movement, would receive $4.40, minus an average per diem car charge of $1.87, or only $2.53, whereas on an identicalinterstate car movement the same carrier would receive the full $4.40, because its per diem charges would be offset by a per diem reclaim from the line-haul carrier. The same situation prevails with respect to the crossover track owned by Milwaukee. Here, the commission used only a part of the interstate yardstick in determining a reasonable intrastate rate. When the entire yardstick — inclusive of per diem and per diem reclaims — is applied, it becomes clear that theintrastate rate fixed by the commission is unreasonable and wholly inadequate.
It is to be noted that the $4.40 rate, which upon theevidence as a whole is manifestly so inadequate as to be confiscatory and unlawful, is a basic element of all the maximum rate charges ordered by the commission. (See, commission rate schedule, supra.) In addition to this basic rate of $4.40, we have the item of switching costs for which defendants were allowed a maximum rate of
In ignoring substantial per diem and per diem reclaims, we have a similar situation with respect to the $11.33 commission rate for switching between the barge terminal and the Minnesota Transfer industries. The $11.33 rate includes the basic charge of $4.40 plus $6.93 for Minnesota Transfer switching. The $6.93 rate corresponds to an interstate charge for interstate switching movements to and *327 from the Hoffman yard and also to and from the Milwaukee connecting track. It was originally fixed by I.C.C. at $6.30 (City of St. Paul v. C. B. Q. R. Co. 168 I.C.C. 379, 389, and City of St. Paul v. C. B. Q. R. Co. 192 I.C.C. 79), but later increased by ten percent to $6.93. (Fifteen Percent Case, Ex parte No. 123, 226 I.C.C. 41.)
The commission either ignored or failed to take into consideration the fact that the I.C.C. reciprocal rate is not indicative of the reasonable cost of the switching service and is in fact not intended to be compensatory. Aside from the noncompensatory nature of reciprocal rates, it is important to note that they were adopted by I.C.C. upon the express condition that the interstate switching carrier should receive the benefit of per diem and per diem reclaims to be paid by the Federal Barge Line. This same condition was coupled with the adoption of the Minnesota Transfer switching rate of $6.93, and, as first noted, with the adoption of the basic rate of $4.40. In its use of I.C.C. interstate rates as a guide for establishing reasonable and lawful intrastate rates for similar services, without taking into consideration and making a properallowance for the per diem and other cost factors which enteredmaterially into the formulation of the interstate rates, the commission, in the light of the evidence as a whole, not only failed to adopt a reasonable and lawful basis for its findings and order, but supplied defendants with the clear and convincing evidence to the contrary which is necessary to sweep away the prima facie foundation of reasonableness which attaches to orders of the commission under §
In view of the evidentiary basis expressly used by the commission to sustain its findings and order — a basis consisting of evidentiary factors which when considered in their entirety convincingly demonstrate the inadequacy and unreasonableness of the rates prescribed — it is unnecessary to give any appreciable weight or consideration to the study made by Vivian, defendants' cost expert. It is interesting to note, however, that Vivian testified that on movements between the Port Authority and industries on the Omaha the average switching cost was $34.18 per car; industries on the Great Northern, *328 $30.91 per car; industries on the Northern Pacific, $27.34 per car; industries on the Milwaukee, involving switching originating and terminating on that road, $19.71 per car; industries on the M. St. L., $26.43 per car; industries in the Fordson district on the Milwaukee, $17.67 per car; Minnesota Transfer industries, $22.85 per car; industries, or to connections with other lines, on the Bridge Terminal of Great Western as a separate unit (which as an item is included in the previously enumerated costs except those of Milwaukee), $10.84 per car. R.L. Bitney, a rate expert for the commission, expressed the opinion that Vivian's cost study was not sound, because it was primarily based upon a traffic year (1933) that was not typical, in that it was second lowest in traffic volume in Minnesota for a period of 22 years, and further in that the study did not take into consideration the cost of all switching operations in the St. Paul switching district. It is significant, if we assume Bitney's criticism to be true and make allowance therefor to the very material extent of reducing Vivian's cost figures by one-half, that we still have a reasonable cost average in excess of the rates allowed by the commission.
We also have an exhibit giving the result of a terminal cost study made by Bitney himself in 1927 with the aid of the Saur-Coverston formula. This study, which was presented before I.C.C. in the Western Trunk Line Class Rates (164 I.C.C. 1, at 96, docket No. 17000, part 2), was introduced by the state and testified to by Bitney. It was not localized withparticular reference to the costs at the St. Paul terminal, but represented the average terminal costs of the hereinafter named railroads for all terminals in Minnesota. Bitney's study, which had not been factored to reflect changes in price levels from 1927 to 1944, showed that for switching movements said to be similar to those involved in the instant case the costs were: For the Omaha, $15.75; the Great Northern, $13.86; the Soo at the St. Paul terminal only, $7.94; the Soo at all terminals, $9; the Northern Pacific at the St. Paul terminal only, $8; the Northern Pacific at all terminals, $7; the Milwaukee, $12.68; the Great Western, $18.32; the Burlington, $11.32; the Northwestern, $12.14; and *329 the M. St. L., $8.23. Bitney testified that the above study under the Saur-Coverston formula, which included the nine railroads involved in these proceedings, gives cost figures which in his opinion unnecessarily make an allowance for a reasonable return on the investment.
Because the evidence as a whole sustains the district court's findings that the commission's order is unreasonable and unlawful, as constituting a taking of property without due process of law, the commission's order (pursuant to §
10. Plaintiffs contend that the appeal of defendants to the district court was not from the whole order of the commission, but only from such parts thereof as were specified in their notice of appeal, and that therefore the commission's determination of the propriety of the establishment of the St. Paul switching district and its finding of the illegal and discriminatory practices by the carriers must stand. We find it unnecessary to determine the scope of the notice of appeal. It was sufficient in any event to present to the district court the issue of whether the commission's order established rates that were unreasonable and unlawful, and the district court, having found the rate so ordered to be unreasonable and unlawful, was required under §
The judgment of the district court is affirmed.
Affirmed.
"* * * it is only when a rate is manifestly so grossly inadequate that it could not have been fixed in the exercise of an honest and intelligent judgment that the courts have any right to declare it to be confiscatory."
Dissenting Opinion
I think that there was no credible or competent evidence of confiscation.
1. The finding of confiscation was based exclusively upon the testimony of Glen F. Vivian. There was no evidence of valuation, cost, expense of operation and maintenance, or other factors entering into the fixing of a rate.
Vivian's testimony should be rejected as a matter of law because of the absence here of the factors which he says are requisite to give it validity. He used the so-called Saur-Coverston formula. According to his testimony, the formula is a means for computing a rate by applying cost, maintenance, expense, and other factors entering into a rate to the facts of a particular case, which can be determined only by "field" tests; that such tests can be made only by first determining costs of service and engine production of the particular carrier for the particular service by tests of at least a week's duration; that after that had been done it is "necessary" that the costs be applied to actual movements of traffic; and that without such tests there was no way of knowing what a particular rate *331 should be. Here, there were no actual movements of traffic to which the formula could be applied. The rates fixed were, therefore, to be prospective in operation. Mr. Vivian testified:
"Now that the costs and engine production had been found, it was necessary that there be some actual movements of traffic to which the costs could be applied. Investigation showed that there had been practically no movement of traffic between industries in St. Paul and the Port Authority of St. Paul.In other words, the carriers were faced with a complaint as toswitching rates with respect to traffic which did not exist. Accordingly, in an effort to present to the Minnesota Railroad and Warehouse Commission data which might be of assistance to them in arriving at their decision, an effort was made to find actual movements of traffic which would most nearly represent the service required in Port Authority movements, if they hadexisted." (Italics supplied.)
To supply this obvious lack of any basis for his testimony, Mr. Vivian said that he made a study of rates for comparable services by railroads in switching for the Federal Barge Line, which he characterized as almost "Identical" with those here involved. That assertion was false as a matter of law, for the obvious reason that, while according to his testimony there were actual traffic movements to the Federal Barge Line, there were none to the Port Authority.
That being true, there was absolutely no factual basis for the application of the formula, and consequently there was no basis for a finding of confiscation.
2. While I do not deem it necessary to consider the matter of the per diem charge for the use of cars, I think the matter is entirely immaterial here. Per diem charges are made by carriers against each other and not by carriers against shippers. Demurrage charges are made by carriers against shippers to cover delays in unloading cars. No claim was made here that demurrage charges permitted by our statute are not adequate. *332
3. Where evidence based upon actual experience has not demonstrated a rate to be confiscatory, the court should not set it aside. As said in New York v. United States,
"Where the result of a rate order is not clearly shown to be confiscatory but its precise effect must await operations under it, the Court has refused to set it aside despite grave doubts as to its consequences."
The commission in the exercise of its rate-making function adopted rates fixed by the interstate commerce commission for comparable services. These rates were but a fraction of those which the carriers contended should be established. The rates established by the interstate commerce commission are at least fair, reasonable, and compensatory. They are clothed with every presumption of validity.
There can be no doubt from what was said by the carriers upon the argument here that they do not want to render the switching services in question if they can avoid doing so.
Under the circumstances, we should be guided by the rule of the New York case, supra. When it appears from actual experience that the rates fixed are confiscatory, it will be time enough to set them aside. *333