St Joseph Stock Yards Co v. United States

• Decision Date: 27 April 1936
• Docket Number: No. 497,497
• Citation: 80 L.Ed. 1033,56 S.Ct. 720,298 U.S. 38
• Parties: ST. JOSEPH STOCK YARDS CO. v. UNITED STATES et al
• Court: U.S. Supreme Court

298 U.S. 38

56 S.Ct. 720

80 L.Ed. 1033

ST. JOSEPH STOCK YARDS CO.

v UNITED STATES et al.

No. 497.

Argued March 2, 1936.

Decided April 27, 1936.

Appeal from the District Court of the United States for the Western District of Missouri.

[Argument of Counsel from pages 38-40 intentionally omitted] Messrs. Ross Dean Rynder and William N. Strack, both of Chicago, Ill., for appellant.

[Argument of Counsel from page 40 intentionally omitted] Messrs. Homer S. Cummings, Atty. Gen., and John Dickinson, Asst. Atty. Gen., for appellees.

[Argument of Counsel from pages 41-44 intentionally omitted] Mr. Chief Justice HUGHES delivered the opinion of the Court.

This suit was brought by St. Joseph Stock Yards Company to restrain the enforcement of an order of the Secretary of Agriculture fixing maximum rates for the company's services. The District Court composed of three judges dismissed the bill of complaint (11 F.Supp. 322) and appeal lies directly to this Court. 7 U.S.C. § 217 (7 U.S.C.A. § 217); 28 U.S.C. § 47 (28 U.S.C.A. § 47).

In October, 1929, the Secretary of Agriculture initiated a general inquiry into the reasonableness of appellant's rates. After hearing, the Secretary prescribed maximum rates which were enjoined by the District Court. St. Joseph Stock Yards Co. v. United States, 58 F.(2d) 290. The Secretary reopened the proceeding and hearing was had in 1933. While the matter was un er consideration, appellant filed in February, 1934, a petition for a further hearing. On May 4, 1934, the Secretary denied the petition and made the order now in question.

The validity of the provisions of the Packers and Stockyards Act 1921 (42 Stat. 159, 7 U.S.C. §§ 181—229 (7 U.S.C.A. §§ 181 229)), authorizing the Secretary of Agriculture to prescribe maximum charges for the services of stockyards, has been sustained. Stafford v. Wallace, 258 U.S. 495, 42 S.Ct. 397, 66 L.Ed. 735, 23 A.L.R. 229; Tagg Bros. & Moor- head v. United States, 280 U.S. 420, 50 S.Ct. 220, 74 L.Ed. 524. In this suit appellant attacked the Secretary's order as lacking the support of essential findings, and also as confiscatory, thus violating the Fifth Amendment of the Federal Constitution. The denial of the request for a further hearing was assailed. No additional evidence was introduced in the District Court, and the case was submitted at the final hearing upon the record made before the Secretary.

First. The Secretary's Findings.—The findings are elaborate. They include detailed findings with respect to the services rendered by appellant and its rates, the used and useful character of appellant's property, the valuation of used and useful land, the value of appellant's structures on the basis of cost of reproduction new less depreciation, working capital, going concern value, fair value on the basis of the facts found, fair rate of return, reasonable operating expenses (including repairs, depreciation and taxes), necessary revenue, and volume of business. The Secretary found that the existing rates produced revenues in excess of those necessary to pay reasonable expenses and afford a fair return; that 'the schedule of rates and charges now in effect is unreasonable and unjustly discriminatory.'

As a guide to his determination of reasonable rates, the Secretary caused an analysis to be made of the books and records of the appellant covering the six-year period from 1927 to 1932. He reached his conclusion in the light of that evidence. Appellant contends that, as a prerequisite to a reduction of rates, it was necessary for the Secretary to find that the rates were unreasonable 'at the time of the hearing,' and that there were no findings to support such a conclusion with respect to the year 1932, the year immediately preceding the hearing. But, in determining whether the existing rates were unreasonable, the Secretary was not confined to evidence as to their operation at the precise time of his hearing, or in the months, or even a year, immediately prior thereto. He was entitled to consider the conditions which then obtained and also to extend his examination over such a reasonable period of past operations as would enable him to make a fair prediction in fixing the maximum rates to be charged in the future. The Secretary had before him the particular conditions which prevailed in the year 1932 and in the selection of the six-year period including that year, and in not taking the year 1932 as a sole criterion we find nothing arbitrary. There are also objections to the failure of the Secretary to make specific findings on certain points of fact, but, so far as the requirement of findings is concerned, we think that the extensive findings that were made adequately supported his order.

Second. The Refusal of the Secretary to Reopen the Proceeding.—The hearing was closed on February 16, 1933. In the following January a copy of the proposed order was transmitted to counsel for appellant and opportunity was given to file exceptions. Numerous exceptions were filed, and at the same time (February, 1934) appellant asked for a further hearing upon the ground that there had been such a serious change in conditions affecting the value of the company's property, its income, and the probable receipts of livestock and expenses of its yards, that the record no longer fairly reflected these matters. The application pointed to the Agricultural Adjustment Act of May 12, 1933 (48 § at. 31), the National Industrial Recovery Act of June 16, 1933 (48 Stat. 195), and the Gold Reserve Act of January 30, 1934 (48 Stat. 337)—all as producing changes of which account should be taken. Appellant also alleged that its books and records were available to give the complete results of its operations for the year 1933, which showed a lower net operating income than that stated in the Secre- tary's proposed report. The Secretary heard argument, made an informal investigation, and denied the application. He was careful to say that, while as a result of his investigation he found no adequate ground for reopening the proceeding, he did not use the facts thus elicited as a part of the record upon which his determination of rates was based. After stating what he deemed to be comparative results of operations in 1933 and in January and February, 1934, the Secretary gave as the general grounds for his action that it was inevitable that in such determinations considerable time must be consumed and that there would be some economic change; that appellant had obtained one rehearing because the first hearing had been followed by a general business depression which adversely affected its gross revenues; that it sought another because since the last hearing there had been a general improvement in those conditions; that in determining the values used as a rate base 'depression or stagnation values' had carefully been avoided and 'normals' used; that the prescribed rates which the Secretary deemed to be fair at that time would, 'as the economic improvement continues, become liberal'; that the matter had been 'in hearing and litigation since the year 1929' and the time had come for decision.

The decree of the District Court was filed on May 1, 1935. Despite the opportunity which the suit afforded, the record shows no endeavor on the part of appellant to prove any additional facts as to the conditions which obtained in 1933, or as to its operations in that year or at any time down to the hearing in the District Court, or as to any matter outside the record which had been made before the Secretary. The court concluded that the effect of the legislation of 1933 was speculative; that the difference between the amount which appellant claimed would have been earned under the prescribed rates, if applied to the business of 1933, and the amount found by the Secretary to constitute the reasonable net return, was 'too small to be taken as a guide for a rate'; that, in order 'to gauge the future,' the Secretary had taken six years, 'two of which were deeply affected by the depression,' and that the experience before the Secretary 'was up to ten days before the date of the hearing.' In that view the court decided that the proceeding should not be reopened and that the question of the effects urged by appellants in that relation should await the test of actual experience upon which, if sufficient reasons were shown, the Secretary's order could be challenged. 11 F.Supp. 322, at page 325. We find no error in that conclusion. If it be found that the rates as prescribed were not confiscatory, we see no reason for holding the Secretary's order to be ineffective because of his refusal to reopen the proceeding. United States v. Northern Pacific Railway Company, 288 U.S. 490, 53 S.Ct. 406, 77 L.Ed. 914.

Third. The Scope of Judicial Review upon the Issue of Confiscation.—The question is not one of fixing a reasonable charge for a mere personal service subject to regulation under the commerce power, as in the case of market agencies employing but little capital. See Tagg Bros. & Moorhead v. United States, supra, 280 U.S. 420, at pages 438, 439, 50 S.Ct. 220, 74 L.Ed. 524. Here a large capital investment is involved and the main issue is as to the alleged confiscation of that investment.

A preliminary question is presented by the contention that the District Court, in the presence of this issue, failed to exercise its independent judgment upon the facts. 11 F.Supp. 322, at pages 326—328. See Ohio Valley Water Co. v. Ben Avon Borough, 253 U.S. 287, 289, 40 S.Ct. 527, 64 L.Ed. 908; Prendergast v. New York Telephone Co., 262 U.S. 43, 50, 43 S.Ct. 466, 67 L.Ed. 853; Bluefield Water Works & Imp. Co. v. Public Service Commission, 262 U.S. 679, 689, 43 S.Ct. 675, 67 L.Ed. 1176; United Railways & Electric Co. v. West, 280 U.S. 234, 251, 50 S.Ct. 123, 74 L.Ed. 390; Tagg Bros. & Moorhead v. United States, supra, 280 U.S. 420, at pages 443, 444, 50 S.Ct. 220, 74 L.Ed. 524; Phillips v. Commissioner, 283 U.S. 589, 600, 51...