145 N.W. 135 | N.D. | 1914
Lead Opinion
Three separate actions are decided by this one opinion. Each was begun by the state of North Dakota, ex rel. attorney general, against the common carriers involved, the Northern Pacific, Minneapolis, St. Paul, & Sault Ste. Marie, and Great Northern Railway Companies. In 1907, Attorney General McCue petitioned this court for its prerogative writ of injunction to restrain the defendants from further noncompliance with chapter 51 of the Session Laws of 1907, that had been in effect since July 1st of that year, and had been ignored by these common carriers. On hearing the writs were issued as prayed for. See opinion of this court, 19 N. D. 45, 25 L.R.A.(N.S.) 1001, 120 N. W. 869. The railroads appealed to the United States Supreme Court, where the cases were affirmed in 216 U. S. 579, 54 L. ed. 624, 30 Sup. Ct. Rep. 423, without prejudice, but permission was granted the carriers to reopen the cases after the rates had been put in force for a sufficient time so that a test of the reasonableness of the rate attacked could be had from the results of operating under the rate, and, accordingly, the carriers have reopened the cases, after the rate had been put in effect for over a year, and they have offered testimony touching the reasonableness of the maximum statutory rate, contending it to be so low as to be confiscatory of their property, and void under the 14th Amendment to the United States Constitution. The cases were tried as one action under the stipulation that any evidence in the case might be considered as proof as to any or all of the defendants. Each carrier, however, has submitted its proof following its own theory.
Separate findings are made as to each carrier. Instead of formulating the usual ultimate findings of fact, we have made them eviden-tiary as well. This that our position, and conclusions may be fully understood on facts as well as law, and also as an aid to the United States Supreme Court, so far as the determination of the facts is concerned, assuming, of course, that this case will again reach that tribunal for final determination. As requested by counsel, we have made our
Statement of Facts as to the Northern Pacific Pailway Company.
The total revenue received by the Northern Pacific Railway Company from the commodity in question, lignite coal, for the entire fiscal year, or twelve months prior to June 30, 1911, was $58,953.07, as shown by the freight receipts of the company for that period. To ascertain the amount of expense incurred and properly chargeable against this particular commodity, in the earning of such gross revenue, by the carriage of that commodity, is the question of fact.
As a result of the painstaking work of the accounting department of this railway company, and its endeavors to render all the assistance possible in determining the matter of the apportionment of expense to this commodity, as is evidenced by the care and detail in the accounting, the information furnished by the exhibits, and that the books of the company have been thrown open to the experts of the state, we are enabled to arrive, with a reasonable degree of certainty, at the proper proportion of expense that should be chargeable against the revenue received from the carriage of this commodity.
From the statistics furnished we may ascertain such result by either of two methods, or by a combination of both. We refer to the division of expense as summarized under seven divisions, as calculated- by the railway company, know as the railway method, or as divided into the 114 separate items of expense, classified into five grand divisions, under the method of the state’s expert accountant, Mr. C. W. Hillman. To
Train operation expense .$ 31,146.77
Switching . 4,971.00
Station service . .:. 4,182.58
Repairs to freight cars . 8,674.04
Maintenance of way and structures . 7,119.93
Loss and damage, traffic, and general expenses. 2,688.26
Total operating expenses.$ 58,782.57
Taxes 4.112 per cent of revenue, $58,953.07, $2,424.15, making a total charge of $61,206.72 in earning the freight revenue from the commodity of $58,953.07, leaving a deficit according to the railroad figures of $2,253.65, upon which they urge tne rate fixed by legislative enactment to be confiscatory, and therefore unconstitutional.
On the other hand, according to the method used by the state’s expert, Mr. Hillman, there would appear to be a net profit over all expenses and taxes of $1,493.71, which is further increased by claims made by the state on page 20 of the brief, that a net profit of $2,391.63 is shown from the lignite traffic over and above total operation expenses inclusive of taxes. Of the seven classifications of expense under the railway method, two of them, that is, taxes in the sum of $2,424.15, and maintenance of way and structures at $7,119.93 (see page 18 of plaintiff’s-' brief), are conceded by the state to’be properly chargeable against the revenue from this commodity. The other charges are questioned, the state maintaining that train operation expenses should be charged at $30,611.38, instead of $31,146.76, a difference of $535.38; for switching, the state contends that the charge should be $4,611.25 on a total of 18,455 car movements chargeable to lignite traffic (see page 14-plaintiff’s brief), instead of a charge based on 19,884 car movements, amounting to $4,971.00, or a difference of $359.75. As to the third subdivision, that of station service, the state, at pages 14 and 15 of its brief, contends the 4,412 cars of lignite receiving services should be charged for at 36 cents per service received per car, each car concededly feceiv-
Train Operation Expense.
This involves a computation from classification of freight with reference to (1) relative cost to all other freight of transportation of lignite; (2) the average tonnage per car; (3) the average haul; (4) the train movement, whether (a) main line through service, (b) main line way service, or (c) branch line service; in the consideration of all of which enters the proportion of empty car mileage to loaded car mileage. The computation which will take into account all the foregoing'factors and yield the proportionate share of expense to be borne by this commodity as apportioned to the whole traffic is, by the use of equated ton, car, and train mileage, producing a relative cost from which, from known factors, the cost per ton mile of lignite coal can be determined, as tables in evidence show the manner of its carriage as to through, way, and branch line freight, the number of cars handled, where- received and where delivered, the mileage and tonnage of each, the relative train loads and the empty car haul charged against the
From N. P. Exhibit 18, for the fiscal year ending June 30, 1911, a summary of previous exhibits, we ascertain that 4,412 carloads of lignite coal, containing 118,550 tons of coal, were hauled an average of 79.13 miles, amounting to the equivalent of hauling 1 ton of coal 9,380,678 miles, or that number of ton miles, for which it was paid the total revenue of $58,953.07,. which computed per car of approximately 27.1 tons gave $13.36 freight per car, or 6.28 mills as the average freight rate per ton mile, for carriage of lignite coal.
We then ascertain from N. P. Exhibit 19 that during said fiscal year there was moved within the state of North Dakota 3,081,552 tons of freight.for an average haul of 227.7 miles, the equivalent of 701,732,-022 tons moved 1 mile, or ton miles, yielding a total revenue, collected in this state, of $6,368,277.67. But this freight movement is divided into three classes, viz., (1) Through freight, which constituted 63.5 per cent of the entire tonnage; (2) freight originating in or terminating within the state, constituting 32.7 of the entire tonnage; (3) freight entirely local to the state, which constituted 3.8 per cent of the entire tonnage; from which tonnage, at approximately 19J tons per car, for all freight, we find 36,450,279 loaded cars have been moved 1 mile. To produce every 100 miles of load as for all traffic, the average shows the additional necessary movement of an empty car 18.43 miles, and to produce the total loaded car miles, we find in addition an empty car mileage of 6,717,556, making a total car movement, loaded and empty, the equivalent of 43,168,035 car miles, of which lignite coal amounted to 346,201 loaded car-miles, with 71.42 per cent thereof, or 247,261 miles, to be added for empty car mileage necessary in moving said loaded car mileage.
Considering now the relative expense incident to the movement of a ton of coal, as compared with the movement of the average ton of all freight, taking into account the fact that the average ear of. lignite •contains approximately 27.1 tons, while the average car of all freight handled contains but approximately 19 tons, we find that this difference is equalized by the fact that for every 100 loaded car miles there is an empty car haul chargeable against the lignite freight of approximately 72 per cent, or 72 miles, while as to all freight the average
We may here properly comment upon the large proportion of empty to loaded car miles in the lignite traffic. The above percentage of approximately 72 per cent is that given by the railway company as the computation from the actual miles of empty car haul computed as to each car, as appears from tables in evidence and from the testimony of the accountants. Thus, it would seem that each car hauling lignite is charged with an empty mileage of more than one half of one freight division. At first glance it would appear that each car was charged with approximately 175 miles empty car haul, in view of the fact that, as shown by Table 6 of N. P. Exhibit 21, 2,532 of the 4,412 cars hauling lignite were received loaded by this carrier from the Soo line at Bismarck; but we assume that for each one of these 2,532 cars so received necessarily an empty return trip for a great portion of the entire loaded distance, or the percentage of nearly 100 of the loaded distance, is charged for empty mileage, as necessarily all Soo freight cars must be returned to Bismarck for delivery to the Soo road. This probably increased rather than diminished the empty car haul properly chargeable. In this connection, too, no empty ear mileage without the state has been added in charging the empty car mileage from the place where the car had last delivered its load back to the mine, because the total return trips of the empty cars received from the Soo at Bismarck, figured as empty for 100 per cent of the loaded haul for such cars alone, amount to 265,394 car miles of empty haul, or
For comparison we here state that the empty car mileage of the Soo amounts to approximately 20 per cent more than that figured as the empty car mileage of the Northern Pacific, but the average loaded car haul of the Soo is but 41.76 miles (plaintiff’s Soo Exhibit 1C) as against an average of 80 miles for the Northern Pacific. The Great Northern road, which makes no charge until the empty car reaches the division upon which it is to be used, has an empty car mileage of 30.9 per cent to a loaded car mileage of 69.1; figured on total car miles empty and loaded of 100 per cent, or figured on a basis of empty to loaded car haul, with a basis of 100 for the loaded car haul, the empty ear mileage would be about 43 per cent of the loaded car haul, and with an average loaded car haul for lignite coal of 63 miles. This difference in the empty car haul between the Great Northern and the other two roads is due in the main to different conditions prevailing along its road, rather than clue to any difference in system of computing empty car mileage against the lignite traffic. We take judicial notice that the population along the Great Northern lignite market would average three times as dense as along the Northern Pacific or Soo lines. Accordingly, the Great Northern has the advantage in freight consumed, leaving more empty cars ready for local loading. Besides, eastern coal is used on the Great Northern in greater proportion than in the Northern Pacific or Soo lignite territory, leaving empty coal cars for use. The same is true as to lumber shipments. We conclude the difference in empty car mileage is actual, and arises from conditions favoring the traffic in such respect on the Great Northern.
Having shown, then, that the empty car haul overcomes the advantage in favor of lignite coal arising from the half greater load in tons per lignite car than average freight, so that lignite is carried on an average relative cost per ton on an equality with all other kinds of freight, leaving out the question of the kind of train on which the same is carried, we now consider the effect of the train service rendered to lignite upon the cost, compared to the average cost of service to all other freight. And to determine this, reference is had to N. P. Exhibit 20, showing the comparative cost of transporting freight in main
Treating main line way freight in the same manner, and from the same table, we find 38,910 train miles carried for $35,982.94, or an average cost per train mile of 92.5 cents. But the average load per main line way freight is but 669 tons as compared with 1,476 tons of main line through freight. So that the ton miles produced by multiplying the train miles by the average train load of 669 tons produces but 25,313,590 ton miles, or tons carried 1 mile, at an average actual cost per 100 ton miles of 13.83 cents.
Treating branch line freight in the same manner, and from the same exhibit, we ascertain a train mileage of 72,143 was conducted at an expense of $45,129.62, or an average actual cost per train mile of 62.6 cents. But here again the average tonnage is much less than the main line through, it being but 404 tons per branch freight line train as against 1,476 of main line through, and 669 of main line way freight, which produces an actual cost for carriage of 100 tons 1 mile, or 100 ton miles, of 15.5 cents on branch line freight service.
The actual cost per 100 ton miles having been found at 5.18, 13.83, and 15.50 cents respectively, of the three classes of service, we find they compare as follows, using 100 per cent as the cost of main line through freight, viz., 100 for main line freight, 266 for main line way freight, and 299 for branch line freight; and that the relation in loads as to ton miles between main line through and main line way freight is as 1,476 tons is to 669 tons, or as 221 is to 100. The foregoing is
It is in the application of the foregoing figures to the actual car mile-, age of lignite freight, classified with reference to main line through, main line way, and branch line freight, that the difference arises between the state and the defendant company. The latter had taken the proportions arrived at as to all freight for the representative months of November and April and applied the same to the entire haul of lignite for the entire fifteen months, using in the application the actual car mileage of lignite for said entire period. It produces the following-figures: For main line through actual car miles 132,346, at a relative cost of 100 equals an equated, car mileage of 132,346 main line way actual car miles 192,246 at a relative cost of 267 as compared with main line through yields in equated car miles 513,297. In branch line actual ear mileage, 39,892, at a relative proportion of 299 to main line through, yields 119,277 in equated miles, all equated as on the proportion of main line through freight. Totaling we find the actual car miles, 364,484, when equated, to yield a total of 764,920 equated car miles, which amounts to 210 per cent of the actual total car mileage. All of which, being the actual and equated mileage in the transportation of lignite coal for the fifteen-months period, is the equivalent of saying that the transportation of lignite costs 210 per cent of the equated ton mile cost of all freight.
Turning now to the third subdivision of Northern Pacific Exhibit 22, we find the actual ton mile of all freight moved in North Dakota during the fiscal year in question (see page 206 abs., state’s witness Johnson’s testimony) to be 701,732,022 ton miles, of which, as appears from N. P. Exhibit 20, 91.121 per cent of 635,843,835 tons carried on the main line at a relative cost of 1 or 100 per cent equals 579,387,280 as the equated revenue ton miles; and of said total actual ton mileage on the main line, 8.879 per cent was carried on main line way trains at a relative cost of 267 per cent of the cost of main line through trains, or 267 times 56,456,575 tons of main line way freight actually carried, equaling 150,739,055 equated revenue ton miles on the basis of main line through freight; and that on branch lines 65,888,167 ton miles were actually carried at a relative cost of 299 per cent of the cost of main line through, yielding 197,005,619 equated revenue ton miles
But in the foregoing computation the railroad company has used, as appears from Exhibits 17 and the second subdivision of the first page of Exhibit 22, the actual lignite ear mileage, classified to main line through, main line way, and branch lines, for a period beginning April 11, 1910, and running to June 30, 1911, or for more than one fiscal year by two and two-thirds months, and that, instead of the figures equated on the second subdivision on the first page of Exhibit 22, we should take the loaded car mileage divided in the main line way and through and branch line trains for the twelve months commencing July 1, 1910, and running to June 30, 1911, which carried forth produces the following as the equated car miles: Main line through actual car mileage, 129,648, at a relative cost of 100 per cent, yields 129,648 in equated car miles; 178,166 main line way car miles at 267 per cent yields 475,693 equated car miles; and actual car miles of branch lines, 38,387, at 299 per cent, yields 114,777 equated car miles, or a total of 346,201 actual car miles for main line through, main line way, and branch lines, for an equated car mileage of 720,118, or the relationship of 100 to 208, equivalent to a finding that the transportation of lignite coal costs 208 per cent of the.equated ton mile cost of all freight. Turning again to N. P. Exhibit 20, we find the total ton mileage carried on main line through trains was 269,656,344, procured by multiplying 182,694 train miles by 1,476 tons, the average gross train load in tons on main line through freights. Treating main line way freight in the same way, we find it amounts to 26,030,790, procured by multiplying 38,910 train miles by 669, the average tonnage per train.
Switching Charges.
The next point of difference between the state and the company concerns switching charges. Upon this we accept the testimony of the railway company as to the fact that in the three switching yards, Fargo, Jamestown, and IVIandan, the total cost of switching in making 599,022 car movements at these points was $149,471.21, approximately 25 cents per car movement. Beferring to N. P. Exhibit 21, we find 4,412 cars
In this connection let us say that no comment is made either in the testimony or in the briefs as to whether the Northern Pacific share of the switching charge for 2,532 cars, allowed at $2.50 per car by the rate bill in question (chap. 51, Sess. Laws 1907), to be apportioned between the carriers, has been figured in as revenue from the haulage of lignite coal. It is true that in the tables and in the testimony of Mr. Johnson, on page 182 of the abstract, statements are made “that the total revenue of the Northern Pacific from the movement of the coal was $63,904.20,” but this is said in connection with freight earnings and average haul. This item alone would, assuming it was divided equally between the Soo and the Northern Pacific companies, amount to $3,165 each. However, counsel have assumed that this has been properly credited to the lignite revenue, and calculations made from N. P. Exhibit 1, in connection with the statutory rate allowed for carriage apportioned between the two carriers as to mileage, figuring at 27.1 tons per car, the cost would be approximately the $14.71 revenue per car for those received from the Soo line, inclusive of the switching charges. On such evidence, and from such deductions, we deem it established that the switching charge has been computed in, and is a part of, the lignite revenue, the total of which is $63,904.20, instead of being credited to the general earnings fund in excess of $6,000,000 in this state.
Station Service.
The next general subdivision of expense is that apportioned to station
The state contends at pages 14 and 15 of its brief that the total number of equated cars should be 'applied to $129,134.24, the station costs, from which freight handlers’ charges of $55,338 have been omitted. But the above computation has in effect already deducted the freight handlers’ charges by equating the number of cars having less than carload tonnage. In other words, in considering the 12,779 cars containing less than carload tonnage on a basis of 20 to 1, allowance was thereby made so that the application of the total equated carloads to the amount of expense, with freight handling expenses deducted, would be approximately the equivalent of deducting it twice.
Repairs, Renewals, and Depreciation of Freight Rolling Stock.
The statistics in evidence show that for the fiscal year the freight car
Traffic and General Expenses and Loss and Damage.
The next general division of expense is subdivided into three separate items as, (a) traffic expenses, (b) general expenses, and (c) loss and damage, for all of which the company seeks to charge the lignite traffic with 4.56 per cent of $58,953.07, the total revenue, or $2,688.26. The state concedes the fact that of this charge that apportioned to traffic and general expenses, in the sum of $1,456.14, is properly chargeable. This is obtained by charging the lignite traffic with the pro
To recapitulate, we find the following to be correct charges against the revenue of the Northern Pacific Railway Company received from the lignite traffic, to wit: (1) Por train operation expense, $30,850.12; (2) switching, 19,884 car movements at 25 cents, $4,971; (3) station service, 4,412 cars times two at 47.4 cents, $4,182.58; (4) freight car repairs, renewals, and depreciation, $7,121.54; (5) traffic and general expenses (no loss and damage allowed), $1,456.14; (6) main
Statement of Pacts as to the Minneapolis, St. Paul, & Sault Ste. Marie Eailway Company.
We are satisfied that this railway company has furnished all the statistics at its command tending to throw light on whether the lignite traffic is carried within this state at a profit or at a loss. But the statistics in the main amount to but estimates, inasmuch as the known bases are wanting from which to make definite calculations. This is understood and practically admitted by the railway officials themselves. The testimony of Mr. Tombs, auditor and leading statistician of tho defendant company, in the examination conducted by the railroad’s own counsel, virtually admits the impossibility of arriving at the cost of carriage of this commodity from the statistics at his disposal, and that any result must be merely approximate, and deductions from the statistics concerning the operation, expenses, and profit of the whole system, instead of that portion of the system within this state, and must of necessity be too indefinite to be classed as even an approximate result' of the cost of transportation of this commodity. Pages 122 to 133 of abstract. We have examined all of the tables of statistics furnished, and are forced to the same conclusion. And this necessarily rejects in ioto the gross earnings theory which counsel for this railroad have endeavored to sustain as applicable under its proof. The gross revenue
However, there is in the testimony some satisfactory proof on a portion of the issues involved. During the fiscal year in question, from June 30, 1910, to June 30, 1911, this railroad transported 205,038 tons of lignite in carloads of approximately 27.1 tons per car, or 7,566 carloads, for an average haul of 41.76 miles, for a gross amount of $83,670 revenue. From N. P. Exhibit 18, we learn that 2,532 cars, or over one third of this entire traffic, were delivered at Bismarck by the Soo line to the Northern Pacific, all of which came from Wilton under a 28-mile haul, the equivalent of 69,593.5 tons, or 1,948,625 ton miles (see Soo Exhibit 35), and for which the Soo line did not collect the rate for the ordinary haul of 28 miles, but instead collected such portion thereof as the haul actually made bore to the entire haul made by both roads, as required by the rate law in question. Turning to N. P. Exhibit 18, we find that the average haul for this identical portion of the traffic carried by the Northern Pacific Bailway Company was 105 miles approximately, which, when 28 miles is added, makes a total average haul of 133 miles, on which haul the Northern Pacific received, on an average, $14.75 per carload, inclusive of its share of a
The testimony is that the Missouri Biver division is the most expensive in operation, and least remunerative of any of the divisions of this railroad, and that upon the Missouri Biver division three fourths of the entire lignite trafile is hauled for two thirds of the revenue received from lignite, leaving to the other one fourth of that traffic one third of the earnings from this commodity. From this we can with reasonable certainty determine that another 2,500 cars of lignite handled on the Missouri Biver division, over and above the 2,532 cars used to make the lignite haul from Wilton to Bismarck on the Missouri Biver division, must also operate at either an actual loss or a noncompensatory rate. And comparing conditions and traffic of this road with the Northern Pacific, operating in virtually the same territory, and considering that the average haul of this commodity clearly favors the Northern Pacific railroad, while the empty car haul must
The average haul by the Northern Pacific of this lignite received from the Soo comes under a long or division haul, and may be classified either as main line through freight or as main line way freight, as its average haul is approximately 105 miles for the whole 2,532 cars so received, as to a 44-mile average haul for all other lignite hauled by the Northern Pacific, as appears from N. P. Exhibit 18. Prom this exhibit we also learn that the Northern Pacific Pailway Company received $14.75 per car as an average charge for these 2,532 cars, or a total revenue of $37,347, from this portion of the lignite traffic received directly from tbe Soo road, leaving only $21,606.07 of a balance of lignite traffic revenue collected from its own road to make up its total revenue from lignite haulage of $58,953.07. Por its portion of the haul the Soo gets, as heretofore stated, $6.63 per car, or 24.5 cents per ton, for transporting the coal 28 miles, where, if it were not for the last paragraph of the rate statute in question, it would receive 40 cents per ton and any switching charges, or, exclusive of switching charges, $10.84 per car, for what it now receives $6.63 per car for one third of its entire traffic in this commodity; and for which, but' for this statutory provision requiring the rate to be figured over both carriers as a single haul, and apportioned between them, it would have received in revenue $27,446.88 exclusive of switching charges, while instead we find that, including its share of switching charges, it has received but $6.63 per car for 2,532 cars, for a total revenue therefrom of $16,787.16,-or $10,659.72 less than it would have received had it delivered the coal to purchasers at Bismarck and collected the statutory freight therefor, and made no charge for switching expenses. With these figures and results, of which there can be no question, we can make the following calculations as to whether the Soo rate is remunerative or otherwise for at least this portion of its traffic: Let us compare
Let us further analyze the lignite traffic on the whole Missouri River division with particular reference to the effect of the short haul and volume of lignite traffic from Wilton to Bismarck delivered to the Northern Pacific.
Prom Soo Exhibit 50 we ascertain that all lignite carried on this division amounted to 139,899 tons, carried an average of 47.’46 miles, producing a live ton mileage of 6,639,737 ton miles, for which a total freight revenue amounting to $56,993.72 was received. That the average carload of lignite on this division amounted to 27.32 tons. Now, turning to Soo Exhibit 35, table 27, page 1, we find the total shipment from Wilton to Bismarck for delivery to the Northern Pacific amounted to 69,593.75 tons, carried 28 miles, and amounting to 1,948,625 ton miles. Deducting this tonnage and ton mileage from the total division tonnage and ton mileage, we have remaining respectively 70,306 tons, yielding a gross mileage of 4,691,112 ton miles of other lignite ship-, ments for the year. But of this 70,306 tons, we find more than one half thereof, or 37,173 tons, as appears from Soo Exhibit 35, page 1, third item, was delivered to local Bismarck dealers, under a shipment of 28 miles from Wilton, yielding 1,040,844 ton miles. Now, deducting this Bismarck local ton and ton mileage, we have respectively 23,133 tons, with a ton mileage of 3,650,268 remaining for the entire division; so that from the output of the Wilton mine delivered at Bismarck, 69,593 tons to the Northern Pacific connecting carrier, and 37,173 tons for local consumption, all for a haul of 28 miles for an aggregate ton mileage of 2,989,469 ton miles, out of a total lignite traffic on that division of 6,639,737 ton miles, leaving of the total balance of lignite traffic for the division 3,650,268 ton miles, produced from 33,133 tons, or an average haul for the one fourth of the lignite traffic remaining on the division of 110.16 miles, after the deduction of the Bismarck local and the Bismarck joint freight. Reduced to freight receipts, we have heretofore demonstrated that the Soo road received from the joint Northern Pacific haul, as its share thereof, $16,787.16; and from the 37,173 tons delivered in Bismarck for local consumption, at the statutory rate of 40 cents per ton, it received $14,869.20, or total freight receipts from Bismarck of $31,656.36;
The deductions from the foregoing establish that three fourths of the lignite freight on the Missouri River division is carried at approximately 1 cent per ton per mile from Wilton to Bismarck, while, if the statute did not require the prorating for the one third of the traffic delivered the Northern Pacific, it would receive the statutory rate of 40 cents per ton for 28 miles, or 1.44 cents per ton for the same carriage. The foregoing figures, and also matters of which we may take judicial notice, are conclusive that the conditions existing on the Northern Pacific and the Soo are similar, both roads traversing virtually the same lignite field, and that of the two the Northern Pacific can carry at the least expense. And in the Northern Pacific Case we have seen that the cost of similar carriage on that road is about that of the Great Northern, running from 1.2 to 1.3 cents per revenue ton mile. Therefore, out of the approximately 140,000 tons of lignite haul on this division, all but approximately 33,000 tons must have been hauled at an actual and considerable loss, and as to freight receipts the road lost money while earning $35,000 of the $57,000 gross earnings from the lignite traffic on this division; and that in earning $17,000 of the $35,000 upen which it lost, it lost approximately $11,000 over what it would have received but for the compulsory pro
Let us now consider the remaining one fourth of the lignite traffic conducted by the Soo on divisions other than the Missouri River division, to ascertain whether such loss can be equalized by other portions of the Soo line within this state. From Soo Exhibit 51, page 122 of the Book of Exhibits, we ascertain that the balance of the lignite traffic for that year, exclusive of the Missouri River division, was 65,139 tons, but that the average load per car was 21.51 tons, or about 6 tons per car less than on the Missouri River division, which tonnage yields 3,028 car loads of lignite freight carried during the fiscal year by this road elsewhere than on its Missouri River division, and for which it received, as shown by this table, $26,676.28, with an average car haul for lignite of 23.13 miles only.
We now observe that a condition exists in the northwestern part of the state, in the lignite fields north of and adjacent to Minot, similar to that above shown in the Bismarck territory, in that the Soo must deliver a considerable portion of its lignite traffic to the Great Northern railroad at Minot, the same as it has divided the Missouri River division traffic with the Northern Pacific at Bismarck, and be compelled to prorate or reduce what would otherwise be the statutory haul proportionate to the entire haul on both roads. The exact amount of this is ascertainable from Soo Exhibit 35, pages 2 to 6 inclusive, from which we ascertain the following joint hauls, to wit: From Wilton to Minot, for 162 miles, 1,153 tons, amounting to 18,681 ton miles; from Bitumina to Minot, 20 tons transported 141 miles, for 2,820 ton miles; from Smith’s Kenmare mine to Minot, 66.6 tons transported 52 miles, for 3,463 ton miles; from Wye to Minot, 47 tons transported 47 miles, for 2,209 ton miles; from Vanderwalker to Minot, 3,244.4 tons transported 13 miles, for 42,177 ton miles; from Lloyd’s to Minot, 2,675.25
It seems, therefore, that, if the statutory rate for the short haul of 50 miles or over is a reasonable rate, and one for which the carrier should be entitled to charge for ordinary transportation, and the presumption from the statute is that it is a reasonable rate, the volume of traffic on the entire Soo system within this state is insufficient and carried under too short a haul for it to equalize the loss of $13,128 occasioned by the compulsory prorating with connecting carriers in the $70,542 worth of revenue earned in the carriage of lignite, presumably at the rate fixed by statute. Or, in other words, we must conclude that the Soo loss was considerable because of the connecting carrier feature of this statute, when it has carried for $83,670 what it otherwise would have received $96,798 for, and for which, had the same carriage been made on the Great Northern or Northern Pacific lines, they would have received approximately such amount therefor. In effect and practical operation we cannot conclude other than that the actual figures
Statement of Pacts as to the Great Northern Railway Company.
The Great Northern railroad is, for accounting purposes, divided into accounting divisions, each main line railroad division constituting an accounting division, and each branch line, of the ten or more in
We do not deem an exhaustive analysis of these many exhibits, and the testimony offered explanatory thereof, necessary to the development, with reasonable certainty, of the problem of whether the statutory rate on lignite coal for the year in question was compensatory or confiscatory in its effect on this road. But we will state- only sufficient to develop and maintain our conclusions.
Eor the year in question the total freight revenue, assignable to the state of North Dakota from all freight amounted to $6,850,656.68, out of which the receipts local to the state, and not to be classed as interstate, but intrastate strictly (which includes lignite revenue of $17,-492.41), were $371,222.78; the average carload for all freight amounted to 13.15 revenue tons; while the average carload of lignite contained 17.85 revenue tons. But in both cases the actual average live carload tonnage is reduced by a charge made against it of the percentage of empty tonnage or empty car haul chargeable to the traffic, that of all freight being thus reduced by the proportion of the empty to loaded car mileage, to wit, 17.6 per cent as to all freight, while the average load of lignite is so charged with the proportion of 25.21 per cent,— the relation that actual computation shows empty car mileage bears to the total loaded and empty car mileage used in the lignite traffic. See Exhibit 6, page 62. The actual ton mileage of all freight is approximately but 16 tons per car, while that for lignite ceal amounted to 25.83 tons, a difference of nearly 10 tons per car in favor of this coal. In
It is apparent that in this manner of attempted ascertainment of the cost of moving this commodity, the result is not even approximately the actual cost of moving this lignite coal, but instead is what would be its cost assuming it to be carried under the average conditions and at the cost of the general average of all freight. For instance, the railroad’s computation of 4.27 mills as the cost of carriage of this commodity on the main line probably does not cover its actual cost, for the reason that this small volume of lignite traffic is buried with five hundred times its volume of other traffic and a general average struck, which may favor the state’s contentions in this case, inasmuch as it is apparent from an investigation of the Northern Pacific Case, based upon actual figures and a classification of the lignite trafile on the main line into main line way and main line through, concerning which no such classification is made or attempted in the Great Northern Case, it would seem that its figures are at least sufficiently low, if not under the actual cost of carriage of this commodity on the main line. In any event, from the very nature of its ascertainment, it must be at best but an estimate.
And the same is true of the railroad’s deductions as to the cost of that portion of the lignite traffic carried on its branch lines. We may here note that out of 895,163 ton miles handled by the branch lines over three fourths thereof, or 719,000 ton miles, is the product of the Noonan mines transported an average haul of 78.8 miles, or exceeding by one fourth, or 15.6 miles, its average haul of 63.2 miles of all lignite coal. The output of this mine amounted to 12,835 tons, or approximately 500 carloads. Also there was delivered to this carrier by the Soo at Minot 10,232 tons, or approximately 400 carloads, hauled by it an average of 66.4 miles, or in excess of its average haul of all coal, a portion of which haul, amounting to 131,219 miles, was Great Northern branch line haul. So, the freight originating at Noonan and Minot constitutes all but 45,000 ton miles of the total branch ton mileage of 895,000 ton miles; 520 carloads cover balance of tonnage of
It is apparent in the railroad figures that certain charges have been included and prorated against the cost of all freight in this state, which apparently are not chargeable against the lignite traffic. Reference is made to traffic and advertising expenses found in plaintiff’s G. N. Exhibit 46E, page 216, Book of Exhibits, under charges against “outside agencies, advertising, and traffic associations,” aggregating approximately $300,000, of which 3 per cent, as appears from the testimony of Mr. Martin, is charged against North Dakota freight receipts. As the lignite receipts amount to a fraction of a per cent only of the total freight receipts, we do not compute the small difference to be added to profit from this source. No reason exists, however, why the lignite traffic should be charged with any part of this expense more properly chargeable to the traffic benefited, it being admitted that there is no benefit to the lignite traffic, which is noncompetitive and must be the traffic of the road upon which it is located. It appears that a similar charge has been erroneously made as to freight handlers, but that the same is too trivial for attempted determination. As to the railroad’s claim for right of reduction of earnings as figured by it, because of extra expense of the haul for the reasons above related, we cannot
The Great Northern has a much less empty car mileage in the lignite traffic than the other roads. The empty car haul of the Northern
Findings of Fact
From the foregoing analysis of the evidence we deduce the following ultimate findings of fact, to wit:
(1) That the Northern Pacific Railway Company during the fiscal year ending June 30, 1911, received from its lignite traffic, conducted wholly wi-thin this state, $58,953.07. That the total cost of transporting all lignite freight during said period, and from which the above earnings were received, was $58,125.46, leaving as net earnings to the railroad from 'said source $847.61. Said coal was carried under the freight rates prescribed by chapter 51 of the Session Laws of 1907, governing rates to be charged for intrastate haulage of lignite coal. That under the above earnings we find that the rates are, as to the Northern Pacific railroad, slightly remunerative, but noncompensatory under the conditions prevailing along its line in this state as to the lignite traffic.
(2) As to the Great Northern Railway Company, the court finds that for the fiscal year ending June 30, 1911, it earned in gross receipts from the hauling of lignite coal $17,492.41, at an expense to it of not to exceed $15,000; and that as to the Great Northern Railway Company the statutory freight rate for lignite coal prescribed by chapter 51 of the Session Laws of 1907, governing said carriage, provided a remunerative and reasonably compensatory tariff or freight rate as to said commodity, under the conditions prevailing on its line within this state.
(3) As to the Minneapolis, St. Paul, & Sault Ste. Marie Railway Company, the court finds that during the fiscal year ending June 30, 1911, the gross earnings of that road from the carriage of lignite coal were $83,670, of which $56,993.72 were the freight receipts from this commodity on its Missouri River division, upon which was handled three fourths of the entire lignite tonnage, and $26,676.28 was received
Preliminary Observations.
Although we refer herein to the legislative rate in question as one regulating lignite coal, the rate in fact is a maximum rate upon all intrastate coal shipments, as we held in our former opinion reported in 19 N. D. 45, 25 L.R.A.(N.S.) 1001, 120 N. W. 869. While it has application almost solely to lignite coal, the proof shows it has governed other shipments, the amounts of which, however, are not included in any of the computations made in these findings*.
This statutory rate is low. The prorating feature further reduces it, and is in effect the teeth of the statute and the portion of it that operates to the disadvantage of the Soo carrier. That part reads: “In case any shipment of coal under the provisions of this section must pass over two or more lines of railroad to reach its destination, then an additional charge of $2.50 per car for each transfer may be allowed and collected to cover cost of switching, and the total amount of freight and switching charges shall be divided among the several railroads concerned, upon such basis as to them may seem just; provided that, if such railroads cannot agree among themselves upon an equitable division thereof, then the board of railroad commissioners shall decide the matter, subject to appeal to the courts.” The state contends that because the Soo has under agreement with the connecting carriers prorated according to the length of haul, and not appealed to the board of railroad commissioners for a larger share of the total joint haul freight receipts than they have taken under the arrangement in ques
We are led to here remark the fact of the legislative rate being a declaration of the sovereign power of this state on a matter of public policy. Importance must be given to the situation as disclosed by the facts, of which the court will take judicial notice, and concerning' ■which legislation in the public interests and founded upon public policy has been as here declared. The central and western portion of this state is underlaid with lignite coal beds, the mining of which for fuel is as profitable as a mining enterprise as it is an economic advantage to the consumers, who must in this climate use coal six months out of the year. Thus, necessity ei’eates an industry and a market. It would seem that the development of both must redound to the benefit of the common carriers, here as ever the connecting link between the producer and the consumer. It is easy to see that the strangulation of the mining and distribution of this coal, or the confining of it by exorbitant freight rates to as limited an area, and therefore as small a market, as ’ possible, must temporarily operate to the great advantage of the common carriers, and against the public welfare of the people of this
Bate Law as Involved.
The facts are somewhat involved, but the application of the law may be made under the following subdivisions leading to the determination of the issue:
(1) Where the intrastate freight rate to be reviewed is a statutory one upon a single commodity, assuming such a rate may be under certain circumstances confiscatory, when is the burden of proof met, and what degree of proof is requisite to establish the rate to be confiscatory ?
(2) Whether such a rate can ever be confiscatory where the freight returns under it yield more than the out-of-pocket costs of transportation of the commodity, even though said returns are insufficient to also fully reimburse that proportion of the railroad’s fixed or overhead*485 costs properly apportionable to sucb commodity. In other words, is a noncompensatory rate confiscation in law?
(3) Assuming that such a commodity rate under certain circumstances-may be held confiscatory in law, is the rate attacked shown to be confiscatory ? In this question is involved both the method and the measure of proof of confiscation.
(4) The rules by which the operation of the statute is measured as to whether the same is confiscatory, in turn, involve, (a) valuation of railroad property used in producing the revenue received under the rate; (b) proof that such returns under the rate'predicated upon the valuation of property used to earn the same are insufficient to amount to a fair rate of interest upon such valuation; and (c) finally, though the rate may yield an inadequate percentage of return on the value of the property utilized in earning the same, to prove the rate confiscatory, it must further appear that the effect of such loss on the commodity rate is to render the total intrastate net earnings from all intrastate freight inadequate to yield a reasonable interest rate on the fair value of all its property employed in producing such total earnings.
(i) Burden and Degree of Proof. We first determine the rules of law governing the attitude of the court toward the rate attacked; where the burden of proof rests’; and the degree of proof necessary before a rate can be established as unconstitutional because confiscatory. As to the governing principles the law is clear, and we can find it nowhere better stated than in the very recent decision of Louisville & N. R. Co. v. Railroad Commission, reported in 208 Fed. 35, in the following language: “In deciding the question whether or not an order made by authority of the state, fixing rates, is Confiscatory, the inferior courts, as to the measure of proof, are guided by well-settled rules binding on them because announced by the Supreme Court. One of those rules is that the rate fixed by legislative authority is prima facie fair and just. . . . The presumption must be indulged at the outset that it is reasonable, and not violative of constitutional rights. The burden of proof is placed on the plaintiff [railroad] to show that the case is one calling for judicial interference with the authorized action of the local authorities. Railroad Commission v. Cumberland Teleph. & Teleg. Co. 212 U. S. 414, 53 L. ed. 577, 29 Sup. Ct. Rep. 357;
(2) Is a Noncompensatory Eate Confiscation. The legislative rate attacked has returned to the railroad more than the outlay for transportation expenses or out-of-pocket costs occasioned in the freightage of the commodity, by some 20 or 30 per cent, which excess, of course, has contributed toward the payment of the railroad’s fixed or overhead charges, which would have been the same whether or not such commodity had been carried. By actual transportation or out-of-pocket costs, we refer, then, to those items only of railroad expense caused solely in the caiuiage of lignite freight, and which costs consume approximately 60 per cent of the revenue so produced under the legislative rate; and distinguish and differentiate such expense from that large additional proportion of railroad expense which must necessarily accrue regardless of the carriage of any particular freight commodity, and toward the payment of which fixed and practically invariable expense 20 to 30 per cent of the gross earnings from the carriage of this
(3 and 4) Method and Measure of Proof of Confiscation. But coming now to the third and fourth subdivision of this discussion, and assuming that proof establishing that a rate on a single commodity as fixed by legislative enactment, because of volume of the traffic in that commodity, and under proper proof, may amount to confiscation of the property of the carrier, there is nothing in the record in this case from which such a conclusion can be reached. Assume that when we find the fact to be that this commodity has not paid its full proportion of the overhead and fixed railroad charges assignable to it, even though it does bring a return greater than the actual out-of-pocket costs of carriage, that we must thereby conclude in law that the commodity is carried at a loss to the carrier, so that such fact may be a basis upon which confiscation can be predicated, still this alone is far from establishing that in law the statutory rate is shown to be confiscatory and void as an infringement of constitutional property rights. To stop here would be to assume a result that must not only be proven by evidence, but established so clearly and convincingly as to leave no reasonable or substantial doubt as to the effect of the rate upon the whole earnings, of which it is but a part, when compared with and measured by the value of the property used in producing the earnings accruing from the commodity rate. In other words, until the railroad has established by proof the existence of a general deficiency in intrastate earnings, or that the same will not pay a reasonable return upon the value of the railroad property used in producing such total intrastate return, it has not established its case, although it has shown a loss to ensue in the carriage of a certain commodity at a maximum statutory rate. Or, as is well said in the special concurring opinion of Judge Grubb in Louisville & N. R. Co. v. Railroad Commission, 208 Fed. 35, at page 52, concerning the effect of an intrastate reduction in passenger rates from 3 to 2-J cents: “The plaintiff must also reasonably satisfy the court of the second proposition, that any deficiency in intrastate earnings below the point of remuneration that may exist is substantially
Conceding, however, that the findings concerning the Soo may serve as the basis of proof of confiscation, if it be further established that the company is not earning a reasonable return upon all of its intrastate business when measured by the amount of its investment, that is, the value of its property within this state necessary to the earning of the revenue received, the company must also establish, to sustain its contention that the rate is confiscatory, (a) the amount of its total net earnings or net loss on its intrastate business; and (b) if it has accumulated net earnings on such intrastate business, it follows that before it can be determined whether the same constitutes a fair income on its investment, it must establish the value of its property used to produce such earnings, and also if it has suffered a net loss on its intrastate traffic, or has made an insufficient profit, measured as above stated, it
As the fixing of the valuation of railroad property is a mixed question of law and fact, it can well be considered here. Neither the Northern Pacific nor the Great Northern have offered any proof either as to total intrastate earnings, or as to the value of the railroad property employed in producing such earnings, both carriers assuming that it was unnecessary to make such proof, and that, should the court find that the gross revenue from this commodity failed to pay gross expenses apportionable for the carriage of this coal, it must, as matter of law, determine the legislative rate to be confiscatory. We quote the following from the oral argument of Mr. Donnelly, taken at the trial: “What we desire to present clearly to this court, regarding the revenue derived from the handling of this particular commodity, is that the operating expenses absorb practically 98 per cent of the gross; that is, taking it on its most favorable basis. This might be taken in regard to any railroad in the United States to indicate confiscatory rates, if confiscation means what we think it means, and that brings up the real legal question in the case. If this court shall persevere in the doctrine laid down in the previous case, the contentions of the carriers will be rejected, because that doctrine is that it is within the right of the state to compel the Northern Pacific Eaihvay Company to move this or that commodity from one point to another, even though it be shown that the company earns no revenue thereby. Such is the contention which, as we think, is the very large question in issue here. Taken from a view point most favorable to the contention of the state, it will be apparent that our operating expenses and taxes exhaust the revenue derived from this coal. If that is the doctrine adhered to, it will be announced for the first time in this ease, as it has been announced in
“What the company is entitled to ask is a fair return upon the value of that which it employs for the public convenience. On the other hand, what the public is entitled to demand is that no more be exacted from it for the use of a public highway than the services rendered by it are reasonably worth.” Smith v. Ames, 169 U. S. 546, 42 L. ed. 849, 18 Sup. Ct. Rep. 418; quoted with approval in the Minnesota Rate Cases (Simpson v. Shepard) 230 U. S. 352, at page 435, 57 L. ed. 1511, 1556, 48 L.R.A.(N.S.) 1151, 33 Sup. Ct. Rep. 729, where the foregoing is supplemented by the following rule, where intrastate rates are under examination: “Where the business of the carrier is both interstate and intrastate, the question whether a scheme of maximum rates fixed by the state for intrastate transportation affords a fair return must be determined by considering separately the value of the property employed in the intrastate business and the compensation allowed in that business under the rates prescribed,” as was also held in Smith v. Ames, supra. And again the court there says: “The necessity of this segregation of the domestic business in determining values and results of operation was recognized by both parties.” And again in the same case, at 230 U. S. 426, the rule is declared to be that “the reasonableness of intrastate rates was to be determined by considering the intrastate business separately.” See also Ames v. Union P. R. Co. 64 Fed. 165, an opinion by Brewer, J. This is again followed in one of the Oregon Rate Cases, Southern P. Co. v. Campbell, 230 U. S. 537, as appears from pages 549, 550, 57 L. ed. 1610, 1623, 1624, 33 Sup. Ct. Rep. 1027, where it is said: “In addition to this omission, the bill was destitute of any allegation showing the expenses incurred in the conduct of the intrastate business as distinguished from the interstate business, or the share of the value of the property which was assignable to the former. In short, the allegations of the bill were wholly insufficient to show that the complainants would be deprived of just compensation in their business of intrastate transportation by virtue of the operation of the order.” Opportunity was given in the court below to amend and cure such defects in the complaint, and on failure to do so a demurrer thereto was sustained, concerning which the Supreme Court says: “But the
The Soo, however, have offered evidence touching some of these issues. See Soo Exhibit 36, and testimony of witness Kolk, explanatory thereof, found in the direct examination at page 146, and the further examination of the witness thereon under succeeding pages to page 162 of the record. Concerning Exhibit 36 the witness testifies that it “shows what would be the cost of reproducing the Soo line and properties in this state at this time” in his judgment, and that such cost would amount to $30,047,798. But on cross-examination the witness shows that the sources of his knowledge are mere tabulations containing items for right of way, station grounds, and clearing, grubbing, and grading, organization, interest during construction, and contingencies, engineering, superintendence, and legal expenses, charges for which mentioned items alone amount to $15,000,000, or one half of the claimed total value of $30,000,000. All these items enumerated are based upon arbitraries or estimates, or upon the railroad value rather than the actual value.
This is made plain on page 152 of the record, where its witness, testifying as to the value of approximately 16,000 acres of right of way, fixed at $100 per acre, and amounting to over one and one-half million dollars, says:
Q. Then your estimate of $100 per acre is on a basis of an estimated railroad value of four times the normal value, is that right?
A. Tes, sir. It is based on this: That in acquiring land for a railroad company, you take a strip of land which does not necessarily follow the government subdivisions; it cuts land diagonally. Frequently it runs into buildings. All these enter into the value that the railroad company has to pay as damages to the adjoining property.*497 That is, the acre value of the right of way is above the normal value, for the reason that it damages the adjacent property. It is impossible, in other words, to procure a railroad right of way at the normal value of land.
The actual, reasonable, market value of railroad property is the basis upon which to determine the percentage of returns yielded by net revenues. Proof of market value is not made by proof of railroad value. The Minnesota and other rate cases in 230 U. S. settle this beyond question. See pages 454-456 of that volume, summed up in the following statement: “Assuming that the company is entitled to a reasonable share in the general prosperity of the communities which it serves, and thus to attribute to its property an increase in value, still the increase so allowed, apart from any improvements it may make, cannot properly extend beyond the fair average of the normal market value of land in the vicinity having a similar character. Otherwise we enter the realm of mere conjecture.” And again: “And where the inquiry is as to the fair value of the property, in order to determine the reasonableness of the return allowed by the rate-making power, it is not admissible to attribute to the property owned by the carriers a speculative increment of value over the amount invested in it, and beyond the value of similar property owned by others, solely by reason of the fact that it is used in the public service. That would be to disregard the essential conditions of the public use, and to make the public use destructive of the public right. . . . We therefore hold that it was error to base the estimates of value of the right of way, yards, and terminals upon the so-called ‘railroad value’ of the property.” Also the following excerpt applies particularly to plaintiff’s offered proof of valuation of its North Dakota properties, shown by Soo Exhibit 36':' “The allowance made below for a conjectural cost of acquisition and consequential damages' must be disapproved. And in this view we also think it was error to add to the amount taken as the present value of the lands the further sums calculated on that value which were embraced in the items of ‘engineering, superintendence, legal expenses,’ ‘contingencies,’ and ‘interest during construction.’ ” Exhibit 36 contains about four mil
But assume that this carrier defendant has some proof in tbe record from which the value of its North Dakota properties devoted to railroad business may be ascertained. There is no apportionment of that value between interstate and intrastate business, which is equally essential in order that the confiscatory nature of the rate may be determined. We may assume that the company has made proof of the value of its road to be $30,000,000. Any attempted apportionment on gross earnings is insufficient under the Minnesota Bate Cases (Simpson v. Shepard) 230 U. S. pages 458—461, 57 L. ed. 1565, 1566, 48 L.R.A.(N.S.) 1151, 33 Sup. Ct. Rep. 729. A gross earnings division, coupled with a comparison of the cost of intrastate and interstate traffic, as was done in the Missouri Rate Cases (Knott v. Chicago, B. & Q. R. Co.) 230 U. S. 474, and pages 504 to 507, 57 L. ed. 1571, 1593, 1594, 33 Sup. Ct. Rep. 975, does not meet the requirements. “It is evident that in an apportionment of expenses, either upon the revenue method or upon the ton mile and passenger mile method, relations may be assumed which do not in fact exist,” and an apportionment so sought to be established is repudiated. Whether in fact any reasonably satisfactory and certain proof of such apportionment of values to traffic can be made seems doubtful, but the rule in this particular is to be declared by the court of last resort. It would seem, however, that before the Federal Supreme Court “have pricked out by the gradual approach and contact of. decisions on the opposing sides” the rule to be observed in this apportionment (quoting from Noble State Bank v. Haskell, 219 U. S. 112, 55 L. ed. 117, 32 L.R.A.(N.S.) 1062, 31 Sup. Ct. Rep. 186, Ann. Cas. 1912A, 487, the Oklahoma guaranty of bank deposits case, wherein the above language is used concerning the definition of police power), that court of last resort will have a hard task in declaring a definite rule as to apportionment that will be harmonious with the usual rules of evidence, and square with the usual contingencies. In those exceptions where relief has been gx-anted the carrier, as in the Minnesota Bate Cases, where relief was granted to the Minneapolis & St. L. R. Co., and in the Missouri Bate Cases, where granted to the three roads as exceptions (see 230 U. S. 507, 508), relief was granted upon general
In attempting to establish its contention that a legislative rate not yielding a sufficient revenue to return a fair profit must be held in law confiscatory, irrespective of whether the effect of the rate and the loss thereunder is to reduce the railroad earnings of a similar class to below the point of being remunerative in order to be confiscatory, counsel have urged the following in oral argument: “It is perfectly obvious that if the state can say to the Northern Pacific ‘you must move coal at a loss,’ it can do the same as to wheat. The attorney general says a point would be reached when it could not do so; and that such point is reached when the railroads can come in and show that the rates are so low they are not making a reasonable profit on their entire business. But we must consider this element: When North Dakota is saying this as to lignite coal, Montana may be saying it as to her ore, and Idaho and Washington as to their lumber. Each state can go on until that point is reached, -and then what rate is confiscatory ? Is it the North Dakota coal rate or the Washington lumber rate ? ’ It is but necessary to carry this argument to its logical end in order to see the difficulties which would arise from such a construction.” The argument is plausible, and would seem to have force, but it has been urged before in the court of last resort in a similar case, or at least where the effect would have been the same. We refer to Atlantic Coast Line R. Co. v. North Carolina Corp. Commission, 206 U. S. 1, 23, 51 L. ed. 933, at page 944, 27 Sup. Ct. Rep. 585, 11 Ann. Cas. 398, wherein the same in principle was contended, as shown from the following quotation: “It is insisted that, although the case be not controlled by the doctrine of Smith v. Ames, nevertheless the arbitrary and unreasonable character of the order results from the fact that to execute it would require the operation of a train at a loss, even if the result of the loss so occasioned would not have the effect of reducing the aggregate net earnings below a reason
Should this court bold that tbe Soo carrier has offered competent evidence to establish tbe value of its property, and under tbe data before us attempt to apportion sucb value between intrastate and interstate use, to determine rate of earnings made in carriage of intrastate freight, and thereunder should grant relief to this carrier on tbe theory that tbe rate was confiscatory and unconstitutional as applied to it, on appeal tbe result would undoubtedly be tbe same as in tbe Arkansas Bate Cases, considered elaborately by tbe circuit court as reported in 187 Fed. 290, and reversed and dismissed on appeal in 230 U. S. 553, 57 L. ed. 1625, 33 Sup. Ct. Rep. 1030. A comparison of tbe tables con
AVe conclude there is a failure of proof as to all these carriers. The rate in operation does not affect alike any two of the three carriers. It is as to the Great Northern compensatory, and a reasonable rate; as to the Northern Pacific sufficient to more than reimburse for all expenses chargeable against the lignite traffic, but yielding so little revenue over such total expense as not to be remunerative in fact; and as to the Soo line, because of the effect of the prorating requirement of the statute, the lignite traffic does not yield to it a return sufficient to pay all costs attributable to lignite carriage, but does return to it an amount some 20 or 30 per cent more than sufficient to pay its out-of-pocket costs of transportation of said commodity. The Great Northern could not on the facts establish the rate to be confiscatory; as to its effect upon the Soo carrier no sufficient proof has been made of the value of its railroad property within this state; and as to the Northern Pacific no attempt has been made to make such necessary proof. Though the Soo has offered evidence upon the value of its North Dakota properties devoted to the railroad use, it has not established by competent evidence, measured by the rule in the rate cases reported in 230 U. S. 352-560, 57 L. ed. 1511-1629, 48 L.R.A.(N.S.) 1151, 33 Sup. Ct. Rep. 729-1030, the value of its railroad property reasonably apportionable as employed in earning its intrastate revenues, from which, as classified and apportioned, deductions are possible as to whether the particular rate attacked is confiscatory.
Though on the trial and in this opinion all three cases have been treated as consolidated by stipulation, in awarding relief each case will be considered separately. Let the writs heretofore issued from this court, entitled in each case, directed to each defendant as prayed for, restraining each several defendant from putting in force or restoring freight tariffs of the class covered by the statutory rate which shall exceed the maximum rate prescribed in chap. 51 of the Session Laws of 1907; and also enjoining collection of a greater freight return for haulage of lignite coal than is provided in said statutory rate as the maximum to be collected therefor, be each and all continued in force. The
Concurrence Opinion
(concurring). The foregoing opinion follows as closely as possible the recent decisions of the Supreme Court of the United States in cases relating to railroad rates. The decisions of that court must, of course, control those of this body in actions of this nature, when the questions or principles are the same.
While the Supreme Court has laid down no very tangible- rules as methods of proving valuation, operating expenses, etc., it seems by a process of elimination to have disapproved the methods of proof adopted by the railroads in the case at bar.
About the nearest approach I can see to its stating a rule for valuation is found in the recent Minnesota Rate Cases, wherein it is said that, “for purposes of establishing rates, the valuation apart from any improvements it may make, cannot properly extend beyond the fair average of the normal market value of land in the vicinity having a similar character,” and other remarks indicating, as said by Judge Goss in expressing the views of this court, that “the actual reasonable market value of railroad property is the basis upon which to determine the percentage of returns yielded by net revenues.” It would seem to me that the reasonable market value of a trunk line of railroad is about as indefinite a basis from a practical standpoint as can be imagined. The history of the last twenty-five years would appear to indicate that railway properties have no value when placed upon the market, in any degree commensurate, either with their fair and honest cost, or their earning capacity, or the value of their stocks and bonds on the market.
If the cost of replacement of the road and equipment is a proper criterion, how can it be replaced, without providing for superintendence, surveying, engineering, and the other preliminary expenses, which are as essential and necessary elements in the construction of a road as are the materials for bridgés or station buildings ?
It is possible that the great court which passed upon these questions only intended its disapproval of proof of the nature offered by the roads,
I am constrained to state my impression from a consideration of the authorities and the evidence submitted in the several cases, that the state of the law at this writing is such as to render it a practical impossibility for a common carrier to establish the facts necessary to its protection against confiscation through the medium of confiscatory rates. This applies as well to methods of distributing the receipts and expenditures between interstate and intrastate traffic, as to the proof of value of the plant. The methods of proof adopted by the roads in the instant cases were the same employed in several of the cases to which reference has been made in the main opinion herein, the most recent of such cases, however, not having been decided until after the proof was taken in the cases at bar, hence, the railroads find themselves provided only with proof which has met the condemnation of the Supreme Court of the United States, and which therefore must be held inadequate by this court.