Brimstone Canal Co v. United States, 240

• Citation: 276 U.S. 104,48 S.Ct. 282,72 L.Ed. 487
• Decision Date: 20 February 1928
• Docket Number: No. 240,240
• Parties: BRIMSTONE R. & CANAL CO. v. UNITED STATES et al
• Court: U.S. Supreme Court

276 U.S. 104

48 S.Ct. 282

72 L.Ed. 487

BRIMSTONE R. & CANAL CO.

v UNITED STATES et al.

No. 240.

Argued Oct. 10, 11, 1927.

Decided Feb. 20, 1928.

Messrs. C. R. Liskow, of Lake Charles, La., Wylie M. Barrow, of Baton Rouge, La., and James T. Kilbreth, of New York City, for appellant.

[Argument of Counsel from page 105 intentionally omitted] Mr. Blackburn Esterline, of Washington, D. C., for the United States.

[Argument of Counsel from page 106 intentionally omitted] Messrs. D. W. Knowlton and P. J. Farrell, both of Washington, D. C., for Interstate Commerce Commission.

[Argument of Counsel from page 107 intentionally omitted] Mr. Justice McREYNOLDS delivered the opinion of the Court.

Appellant seeks annulment of an Interstate Commerce Commission order, entered December 14, 1925, which designated the divisions it might thereafter receive from agreed joint rates and required readjustment of divisions received subsequent to August 1, 1921, when the investigation began.

The court below dismissed the bill. Two of the objections to the order, there advanced, will be considered.

(1) The Commission failed to investigate or determine the reasonableness or justness of the divisions, or whether they were unjust, unreasonable, inequitable, or unduly preferential or prejudicial, as between the carriers; also failed to consider whether the circumstances entitled one to a greater or less proportion than another of the joint rates, as commanded by section 15(6), Transportation Act 1920 (49 USCA § 15; Comp. St. § 8583).

(2) The joint rates were agreed upon by the parties, and not 'established pursuant to any finding or order' of the Commission, within section 15(6), Transportation Act 1920. Consequently the Commission had no power to require adjustments for any period prior to the final order.

Section 1(4), Transportation Act 1920 (49 USCA § 1; Comp. St. § 8563), directs common carriers to establish through routes, reasonable and equitable rates, fares, and charges; also to establish divisions of joint rates just, reasonable, and equitable as between the participants, which shall not unduly prefer or prejudice any of them.

Section 15(1) empowers the Commission, whenever, after full hearing, it shall find any rate charged by a carrier is or will be unjust or unreasonable or unjustly discriminatory or unduly preferential, or prejudicial, or otherwise in violation of this act, to determine and prescribe the just and reasonable rate thereafter to be observed, and to make an order requiring the carrier to cease and desist from such violation.

Section 15(3) provides that 'the Commission may, and it shall whenever deemed by it to be necessary or desirable in the public interest, after full hearing,' establish joint rates, 'and the divisions of such rates, fares, or charges as hereinafter provided.'

Section 15(6):

'Whenever, after full hearing upon complaint or upon its own initiative, the Commission is of opinion that the divisions of joint rates, fares, or charges, applicable to the transportation of passengers or property, are or will be unjust, unreasonable, inequitable, or unduly preferential or prejudicial as between the carriers parties thereto (whether agreed upon by such carriers, or any of them, or otherwise established), the Commission shall by order prescribe the just, reasonable, and equitable divisions thereof to be received by the several carriers, and in cases where the joint rate, fare, or charge was established pursuant to a finding or order of the Commission and the divisions thereof are found by it to have been unjust, unreasonable, or inequitable, or unduly preferential or prejudicial, the Commission may also by order determine what (for the period subsequent to the filing of the complaint or petition or the making of the order of investigation) would have been the just, reasonable, and equitable divisions thereof to be received by the several carriers, and require adjustment to be made in accordance therewith. In so prescribing and determining the divisions of joint rates, fares and charges, the Commission shall give due consideration, among other things, to the efficiency with which the carriers concerned are operated, the amount of revenue required to pay their respective operating expenses, taxes, and a fair return on their railway property held for and used in the service of transportation, and the importance to the public of the transportation services of such carriers, and also whether any particular participating carrier is an originating, intermediate, or delivering line, and any other fact or circumstance which would ordinarily, without regard to the mileage haul, entitle one carrier to a greater or less proportion than another carrier of the joint rate, fare or charge.'

Appellant owns and operates a railroad ten miles long in southwestern Louisiana, is a common carrier of freight only, and makes interchanges with lines of the Southern Pacific¹ and Kansas City Southern. Except five shares, its capital stock-$200,000-is owned by Union Sulphur Company, which operates mines near its line and consigns and receives over 90 per centum of the property moving thereon. Prior to 1920 appellant and connecting carriers established through rates and divisions by agreements. These were modified as permitted or suggested in Ex parte 74 (1920) 58 Interst. Com. R. 220, and Matter of Reduced Rates (1922) 68 Interst. Com. R. 676.

In Ex parte 74, the Commission considered applications under section 15a,² Transportation Act 1920 (49 USCA § 15a; Comp. St. § 8583a), for authority generally to increase rates so that carriers as a whole might earn a fair return. It found (July 29, 1920, 58 Interst. Com. R. 220) * * * The following percentage increases in the charges for freight service, including switching and special services, together with the other increases hereinbefore approved, would under present conditions result in rates not unreasonable in the aggregate under section 1 of the act and would enable the carriers in the respective groups, under honest, efficient, and economical management and reasonable expenditures for maintenance of way, structures, and equipment, to earn an aggregate annual railway operating income equal, as nearly as may be, to a return of 5 1/2 per cent. upon the aggregate value, for the purposes of this proceeding, of the railway property of such carriers held for and used in the service of transportation and one-half of 1 per cent. in addition; Eastern group, 40 per cent.; Southern group, 25 per cent.; Western group, 35 per cent.; Mountain-Pacific group, 25 per cent. * * *

'After carefully considering the situation we find that with the exceptions hereinafter noted general percentage increases made to fit the needs of the groups of lines serving each of the four groups must be considered for present purposes the most practicable. This conclusion is without prejudice to any subsequent finding in individual situations.'

And it accordingly authorized general increases as specified 'in the rates, fares, and charges of railroads within the continental United States.' It did not approve or require the adoption or maintenance of any particular rate.

In the Matter of Reduced Rates (May 16, 1922) 68 Interst. Com. R. 676, instituted to determine whether further general reductions might be required under section 1, also what would constitute fair return under section 15a(3), after referring to the authorized increases of 1920, the Commission found that 5.75 per centum would be fair thereafter and would result if formerly authorized rates were reduced by specified perentages. The order was that carriers should promptly report 'whether the findings herein will be carried into effect without formal order or orders by us.' It did not require the adoption or maintenance of any rate, nor was any particular rate approved.

August 1, 1921, the Commission began 'an investigation into and concerning the justness, reasonableness, and equitableness of the divisions received by the Brimstone Railroad & Canal Company out of the joint rates applicable to the transportation of property.' It ordered:

'That the Brimstone Railroad and Canal Company, the Southern Pacific Company, and the Kansas City Southern Railway Company be and they hereby are made respondents to this proceeding.'

Testimony was taken relative to ownership and organization of the Brimstone Company; its relation to Union Sulphur Company; its operating and financial condition, including dividends, surplus, and character of service performed; volume of road-building material carried for parish purposes; establishment by United States Railroad Administration of divisions with connecting lines, with factors considered in connection therewith; comparison between the questioned divisions and those received by otehr lines in the same territory; also value of operating property, including cost of reproduction.

The Commission's first report-April 4, 1922-declared the Brimstone Company a common carrier subject to the interstate commerce act entitled to participate in joint rates, or have its charges absorbed under appropriate tariff provisions, and further:

'The divisions to the Brimstone should produce no more than an amount sufficient to cover the cost of its service and a fair return upon the property held for and used in the service of transportation. We conclude that the facts of record, including the dividends paid by the Brimstone in past years and the accumulated credit balance to profit and loss, indicate divisions to the Brimstone which are disproportionate, in view of the service rendered, and are tantamount to a rebate to the proprietary company.

'We find that the divisions of joint rates now received by the Brimstone from the two other respondents on interstate traffic are, and for the future will be unjust, unreasonable, inequitable, and to the extent that they exceed or may exceed the cost of the service and a fair return...