United States v. Great Northern Ry Co

• Citation: 287 U.S. 144,53 S.Ct. 28,77 L.Ed. 223
• Decision Date: 07 November 1932
• Docket Number: No. 96,96
• Parties: UNITED STATES v. GREAT NORTHERN RY. CO
• Court: United States Supreme Court

287 U.S. 144

53 S.Ct. 28

77 L.Ed. 223

UNITED STATES

v GREAT NORTHERN RY. CO.

No. 96.

Argued Oct. 11, 1932.

Decided Nov. 7, 1932.

The Attorney General and Mr. Thomas D. Thacher, Sol. Gen., of Washington, D.C., for the United States.

Messrs. F. G. Dorety and R. J. Hagman, both of St. Paul, Minn., and W. W. Millan, of Washington, D.C., for respondent.

[Argument of Counsel from page 145 intentionally omitted] Mr. Justice CARDOZO delivered the opinion of the Court.

The petitioner, the United States of America, has sued to recover a payment made to the respondent, the Great Northern Railway Company, by force of a certificate of the Interstate Commerce Commission, the government asserting that the payment was excessive and that the certificate permitting it was the product of mistake. A judgment of the District Court in favor of the respondent was affirmed by the Circuit Court of Appeals for the Eighth Circuit. 57 F.(2d) 385. The case is here on certiorari. 286 U.S. 540, 52 S.Ct. 648, 76 L.Ed. 1278.

The respondent was a railroad under federal control when control was relinquished by the government on March 1, 1920. By the Transportation Act of that year (41 Stat. 464, § 209, 49 U.S.C., § 77 (49 USCA § 77)), it had the protection of guaranty as to its railway operating income for six months thereafter. The United States guaranteed that during this guaranty period the income should be not less than one-half of the annual compensation to which the carrier was entitled during the period of federal control. United States v. Guaranty Trust Co., 280 U.S. 478, 50 S.Ct. 212, 74 L.Ed. 556; Texas & Pacific Ry. Co. v. United States, 286 U.S. 285, 52 S.Ct. 528, 76 L.Ed. 1108; Continental Tie & Lumber Co. v. United States, 286 U.S. 290, 52 S.Ct. 529, 76 L.Ed. 1111. Upon the Interstate Commerce Commission was laid the duty of ascertaining the amounts necessary to make good this guaranty and of certifying to the Secretary of the Treasury the results of the inquiry. Something more was required for this purpose than the mere comparison of receipts and expenses during the period of control with receipts and expenses during the six months following. In the ascertainment of railway operating income, or any deficit therein, the amount to be included in operating expenses for maintenance of way and structures, or for maintenance of equipment, was to be fixed by the Commission, and was not dependent solely on the action of the carrier. For that purpose reference was to be had to the tests prescribed by the standard form of contract for federal control. Transportation Act 1920, § 209(f)(3), 49 USCA § 77(f)(3); Federal Control Contract, § 5(a). The Commission was to take as its base the average six months' maintenance expenses of the carrier during the years characterized as 'the test period,' i.e., the three years ending June 30, 1917. This amount was to be readjusted, however, so as to make allowance for changes in the extent of property maintained, for changes in the nature or intensity of the use, and, most important, for changes in the cost of labor and material. The end in view was the arrival at a figure that would permit the property to be kept up in the same state of reparation as at the time when the carrier's possession had been yielded to the government. The task of the Commission was not exhausted, however, when it ascertained the allowance to be made for the cost of maintenance. It was to require the restatement of other operating expenses in addition to those for maintenance 'to the extent necessary to correct and exclude any disproportionate or unreasonable charge to such expenses' for the guaranty period, or any charge 'which under a proper system of accounting is attributable to another period.' Transportation Act 1920, § 209(f), (5), 49 USCA § 77(f)(5).

A task so vast and intricate exacted time and study. Many of the carriers, however, including this respondent, were in urgent need of cash for pressing obligations. The statute contained provisions that were intended to relieve the pressure. By section 209(h), of the act (41 Stat. 464, 466), the Commission was empowered, upon application during the guaranty period, to issue certificates for advance payments, such advances to be not in excess of the 'estimated amount' necessary to make good the guaranty. The Secretary of the Treasury was directed to make the advances in the amounts specified in the certificate upon the execution by the carrier of a contract, 'secured in such manner as the Secretary may determine,' that upon final determination of the amount of the guaranty it would repay the excess payment with interest, if excess there should be found to be. Under the authority of that section, certificates in the amount of $6,500,000 were issued by the Commission and collected by the carrier. The payments thus received were well within the limit of the guaranty as finally determined, and as to these no claim for reimbursement is put forward by the government.

The relief permissible under section 209(h) turned out to be inadequate. It was limited to applications made before the guaranty period had expired, to applications; that is to say, before September 1, 1920. In the case of the respondent, as in that of other carriers, the guaranty period expired with the Commission still unready to announce its ultimate award, and with the pressure of the need for intermediate relief as urgent as before. Accordingly, the Transportation Act 1920 was amended on February 26, 1921, by authorizing the Commission, if not at the time able finally to determine the whole amount due, to make its certificate for any amount definitely ascertained by it to be due, and thereafter in the same manner to make further certificates, until the whole amount due had been certified. Act of February 26, 1921, c. 72, 41 Stat. 1145, § 212, 49 U.S.C. § 79 (49 USCA § 79). The text of the statute is quoted in the margin.¹

At the time of the enactment of that section, the respondent had already filed with the Commission a guaranty claim in the sum of $18,498,391.67, of which $6,500,000 had already been paid through certificates issued under section 209(h), leaving a balance of $11,998,391.67 still claimed to be due. The respondent, in submitting this claim, gave notice that it required a $6,000,000 advance to meet a pressing obligation, and asked for a certificate to that extent to be used as a basis for credit upon an application for a bank loan. Such a certificate was issued on February 23, 1921, though the Commission and the carrier understood that under the statute then in force it could not be made the basis for a payment by the Secretary of the Treasury. Three days later section 212 was added to the Transportation Act, and the legal aspect of the situation was at once transformed. At the respondent's request, the Commission canceled its advisory certificate of February 23, 1921, and on March 1, 1921, issued a new certificate under the authority of the statute. 'The Commission has ascertained and hereby certifies to the Secretary of the Treasury that the amount of six million dollars ($6,000,000) in addition to any sum or sums heretofore certified in favor of the carrier under section 209 of the Transportation Act 1920 (49 USCA § 77), is necessary to make good to said carrier the guaranty provided by the said section. The Commission hereby certifies that such amount of six million dollars ($6,000,000) cannot be reduced by further accounting or otherwise,' with which was coupled a statement that additional amounts might be found to be owing on further investigation.

The respondent, armed with this certificate, procured from the Treasury the $6,000,000 required for its present needs. This amount, added to the earlier payments of $6,500,000, makes up a total of $12,500,000 collected on account of its claim against the government. The total was nearly $6,000,000 less than the amount claimed by the respondent to be ultimately due. It was about $3,200,000 less than the estimate of the final payment submitted as a basis for the certificate in a report to the Commission by the Bureau of Finance. Whatever the final payment might afterwards be found to be, the sum certified to be due left or seemed to leave a margin of error ample enough for any change within the zone of reasonable expectation.

The Commission, after satisfying thus the instant needs of the respondent, continued the investigations necessary to ascertain the final balance. Not till five years had passed was it ready to announce its findings. In the meantime it had filed a series of reports or decisions defining or revising the principles and formulae that were to govern it thereafter in the allowance or disallowance of expenditures for maintenance. See, e.g., Maintenance Expenses under section 209, 70 I.C.C. 115; In the Matter of Final Settlement under section 209 of the Transportation Act 1920, 70 I.C.C. 771. By its final certificate issued on June 8, 1926, under section 209(g), it certified that the total amount necessary to make good the guaranty was $11,170,214.02, which was less by $1,329,786.98 than the payments already made. Cf. Great Northern Railway v. United States, 277 U.S. 172, 48 S.Ct. 466, 72 L.Ed. 838. For the recovery of the difference with interest this action was brought.

We may assume in favor of the petitioner that a certificate issued by the Commission under section 212 of the statute is open to impeachment for fraud or mistake, and that payments burdened with those infirmities are subject to be reclaimed. If this be assumed, it does not avail without more to lay a duty of restitution upon the carrier before us. Fraud in the making of the certificate is neither proved nor even intimated. Mistake also there was none, but merely a revision of judgment in respect of matters of opinion. The respondent reported that it had paid out for maintenance during the guaranty period $28,982,000. There is no claim that this...