Baltimore Co v. United States

• Decision Date: 18 May 1936
• Docket Number: No. 312,312
• Parties: BALTIMORE & O.R. CO. et al. v. UNITED STATES et al. Re
• Court: U.S. Supreme Court

298 U.S. 349

56 S.Ct. 797

80 L.Ed. 1209

BALTIMORE & O.R. CO. et al.

v UNITED STATES et al.

No. 312.

Reargued March 3, 4, 1936.

Decided May 18, 1936.

Appeal from the District Court of the United States for the Eastern District of Virginia.

[Syllabus from pages 349-351 intentionally omitted] Messrs. E. L. Beach, of Richmond, Va., and Frederic D. McKenney, of Washington, D.C., for appellants.

Messrs. Homer S. Cummings, Atty. Gen., and Edward M. Reidy, of Washington, D.C., for appellees United States and Interstate Commerce Commission.

Mr. Frank W. Gwathmey, of Washington, D.C., for appellees Atlantic Coast Line R. Co. and others.

Mr. Justice BUTLER delivered the opinion of the Court.

This is a suit in equity¹ brought by appellants against the United States to set aside and permanently to enjoin the enforcement of an order of the Interstate Commerce Commission based on its report made July 3, 1933, and modified in accordance with its report of January 8, 1934.² The Commission July 10, 1928, had prescribed rates on citrus fruit³ from places of production in Florida to points in Official Classification Territory.⁴ The order here in controversy prescribes divisions as between southern carriers hauling from Florida to Richmond, Va, and other gateways and northern carriers hauling to destinations and prescribed adjustment to be made by the latter.⁵ The Boston & Maine and other northern carriers intervened as parties plaintiff.⁶ The Commission and the Atlantic Coast Line and other southern carriers intervened as parties defendant.⁷ The complaint assails the order upon the grounds that it is based on a misconstruction of the act and is confiscatory. The case was tried by three judges. In addition to the evidence given before the Commission there were offered and received at the trial the testimony of many witnesses and much documentary evidence. The court held plaintiffs not entitled to relief dismissed the case.⁸ They appealed.⁹

The history and structure of the joint rates shed light on questions to be decided. June 25, 1908, the Commission found the rates, called 'gathering rates,' from places of shipment in Florida to junctions in the northern part of that state reasonable, but that the charges for transportation from the junctions to the north were unreason- able. It prescribed 'proportionals' which were added to the gathering rates to make joint rates applicable over through routes to destinations. Included in the proportionals were stated amounts, called 'specifics,' per box of estimated weight of 80 pounds to cover hauls beyond the gateways. These specifics went to the northern l nes and constituted their share of the joint rates.¹⁰

In 1915 the Commission allowed the carriers in official territory a general rate increase of 5 per cent.¹¹ and in 1917 granted an additional 15 per cent.¹² These increases were applicable generally to interterritorial hauls. The specifics for northern lines were not advanced. In 1918, while the carriers were under federal control, the director general raised rates 25 per cent. The divisions to the southern and northern lines were increased by that ratio. In 1920, after the railroads were returned to their owners, the Commission grnated to carriers in the southern group a general rate increase of 25 per cent. and to those in the eastern group, which included the northern lines here involved, an advance of 40 per cent. It also authorized charges for interterritorial hauls to be raised by 33 1/3 per cent.¹³ While that was enough to increase the southern carriers' shares by 25 per cent. and those of the northern lines by 40 per cent. in harmony with the respective rate increases, each group of carriers received divisions raised by 33 1/3 per cent. The northern lines emphasize the fact that if their divisions had kept step with rates in that territory they would have been increased four times whereas in fact their divisions did not share at all in either of the first two advances and only partially in the fourth, i.e., 33 1/3 instead of 40 per cent.

The joint rates prescribed by the Commission's order of July 10, 1928, were specified amounts per 100 pounds. The assumed weight of 80 pounds per box to which were applied the specifics to cover hauls of the northern carriers was too low. While the Commission failed definitely to find actual average weight per box, its report distinctly indicates that it was about 90 pounds.¹⁴ After the taking effect of the new rates the northern lines in trunk line and New England territories took, out of the freight charges they collected, and retained as their divisions per 100 pounds 25 per cent. more than the specific per box. The northern lines in central territory adopted 90 pounds as the basis on which to make conversion of the rate per box to rate per 100 pounds. The increase was slightly over 11.1 per cent.

The divisions were not satisfactory to either group of carriers. November 22, 1930, the Atlantic Coast Line and other southern carriers filed their complaint¹⁵ requesting the Commission to condemn the divisions of citrus fruit rates to trunk line and New England territories, then being received by them, as a violation of the requirements of section 1(4), of the act, 49 U.S.C.A. § 1(4) to prescribe just, reasonable, and equitable divisions in accordance with section 15(6), 49 U.S.C.A. § 15(6), and to require adjustment and refund to be made by northern lines in respect of transportation subsequent to the complaint. January 3, 1931, the Commission instituted a general investigation¹⁶ in respect of divisions of joint interterritorial rates between official and southern territory. April 20, 1931, the northern lines filed a cross-complaint. To prevent duplication, the general investigation, so far as it concerned divisions of rates on citrus fruit in central territory, was set for hearing on the same record as the complaint of the southern lines in respect of divisions of rates to trunk line and New England territory.¹⁷ Thus the issue concerning divisions of citrus fruit rates from Florida to destinations in official territory was segregated from the broader controversy. The order here assailed assigns to appellants divisions yielding more than did those accepted by them for a lo g time prior to the taking effect of the rate order of July 10, 1928.

There was before the Commission no question as to the validity of the joint rates. There was no claim that they were not sufficient to cover 'out-of-pocket costs,' i.e., the amount by which performance of the service covered by the rates caused operating expenses and taxes to be higher than otherwise they would have been. Nor was it suggested that they were confiscatory, i.e., not sufficient to cover operating expenses and taxes justly apportionable to the traffic plus an amount reasonably sufficient in the circumstances to constitute just compensation for the use of the carriers' property in that service. The division of presumably reasonable rates was the only problem before the Commission. Neither complaint alleged that existing divisions were not more than suffficient to cover the out-of-pocket costs or that they were confiscatory.

The Commission was required to decide whether, in respect of the joint rates, the carriers had discharged the duties imposed upon them by section 1(4), i.e., 'to establish just, reasonable, and equitable divisions thereof as between the carriers * * * participating therein which shall not unduly prefer or prejudice any of such participating carriers.' The prescribing of divisions is a legislative function.¹⁸ Exertion of that power by the Commission is conditioned upon its finding after a full hearing that the divisions then in force do not, or in the future will not, comply with the specified standards. In proceedings to determine and prescribe divisions the Commission is governed by sections 1(4), 15(6), 15a(2), 49 U.S.C.A. §§ (4), 15(6), 15a(2); it is not required or authorized to investigate or determine whether the joint rates are reasonable or confiscatory. The question whether it complied with the requirements of the act does not depend upon the level of the rates or the amounts of revenue to be divided. The purpose of the provisions just cited is to empower and require the Commission to make divisions that colloquially may be said to be fair.¹⁹

But this does not imply that, without regard to amount, the carriers are bound to accept prescribed divisions. Congress is without power, directly or through the Commission, to require them to serve the public at rates that are confiscatory. When made in accordance with the act, the Commission's orders prescribing divisions are the equivalent of Acts of Congress requiring the carriers to serve for the amounts specified. Taken, as they must be, in connection with the duties to the public imposed by law upon the carriers, they command service and for that purpose expropriate the use of carriers' property. If when made the prescribed divisions are or later shall become less than just compensation, the carriers may not be required to serve therefor. ²⁰ And, if after appropriate effort they fail to obtain divisions of nonconfiscatory joint rates that do constitute just compensation for their services including the use of their properties the carriers may be suit in equity have the order prescribing, or requiring to be kept in force, the challenged divisions adjudged void and its enforcement permanently enjoined. ²¹ Section 15(6) 49 U.S.C.A. § 15(6), requires the Commission on complaint of any participating carrier to determine whether existing divisions are just, reasonable and equitable and, if not, to prescribe others that do comply with the law. Its denial of relief from existing divisions operates to direct service under them. Though negative in form, the order of denial is affirmative in effect. In some circumstances carriers may accept rates or divisions that do not yield enough to cover operating expenses...