Chicago & A. Ry. Co. v. United States

• Citation: 156 F. 558
• Decision Date: 16 April 1907
• Docket Number: 1,303-1,305.
• Parties: CHICAGO & A. RY. CO. v. UNITED STATES. FAITHORN v. SAME. WANN v. SAME.
• Court: U.S. Court of Appeals — Seventh Circuit

156 F. 558

CHICAGO & A. RY. CO. v. UNITED STATES. FAITHORN v. SAME. WANN v. SAME.

Nos. 1,303-1,305.

United States Court of Appeals, Seventh Circuit.

April 16, 1907

On Rehearing, October 9, 1907.

Ralph M. Shaw, for plaintiffs in error.

F. G Hanchett, for the United States.

Before GROSSCUP, BAKER, and SEAMAN, Circuit Judges.

BAKER Circuit Judge.

Plaintiffs in error were jointly convicted of violating that part of section 1 of the Elkins Act (Act Feb. 19, 1903, c. 708, 32 Stat. 847) which inhibits the giving of 'any rebate * * * in respect of the transportation of any property in interstate or foreign commerce * * * whereby any such property shall by any device whatever be transported at a less rate than that published and filed. ' U.S. Comp. St Supp. 1907, p. 880.

The government proved that the Chicago & Alton was an interstate common carrier, having a line extending eastward from Kansas City, Mo.; that the Kansas City Railway Company was an interstate common carrier between Kansas City, Kan., and Kansas City, Mo., having a belt line over which it hauled cars of freight from industries along its tracks to various railroads; that the Schwarzschild & Sulzberger Company, a corporation, owned and operated a meat packing plant at Kansas City, Kan., adjoining the tracks of the Belt Line that the S. & S. Co. was not a common carrier; that within its plant, and running around and between various buildings thereof, the S. & S. Co. at a cost of $75,000 built about a mile and a half of tracks, switches, and sidings, on which the annual outlay for maintenance and taxes was $1,200; that the S. & S. tracks connected with the Belt Line tracks at the property line; that the Alton had arrangements with the Belt Line and with eastern railroads whereby the Alton undertook to transport property in interstate commerce from Kansas City, Kan., to seaboard cities; that the Alton published and filed schedules of rates for such transportation; that the Belt Line published and filed a rate of $3 a car for hauling cars of freight over its line from the S. & S. plant to the Alton; that the Alton transported various car loads of freight for the S. & S. Co. from Kansas City, Kan., to eastern points, collected from the S. & S. co. the full amount of the published rates, and paid to the Belt Line $3 a car, which amount was included in the Alton's published rates; and that the Alton, through plaintiffs in error Faithorn as vice president, and Wann as general freight agent, paid back to the S. & S. Co., under book entries of 'refund of terminal charges,' $1 on each car for the use made of the S. & S. tracks in getting the S. & S. Co.'s cars of freight out upon the Belt Line's tracks.

At the conclusion of the government's evidence, plaintiffs in error moved that the jury be directed to return a verdict of not guilty. This motion was overruled. Thereupon plaintiffs in error offered to prove that the use of the S. & S. tracks was reasonably worth $1 a car. The court excluded the proffered evidence.

These adverse rulings present but a single question. If the fact that the S. & S. Co.'s charge for the use of its tracks was reasonable would take the case out from under the statute, the burden would lie upon the government, in order to bring the case within the statute, to prove that the charge was unreasonable; and this the government did not attempt to do. So the assignments of error center on the challenge of the sufficiency of the government's evidence to sustain the verdict of guilty.

Some discussion in briefs and in oral argument was had over the fact that the arrangement between the Alton and the S. & S. Co. was not published and filed with the Interstate Commerce Commission.

The S. & S. Co. was not a common carrier, and therefore had nothing in the way of rates and charges to publish and file with the commission. Shippers, of course, were interested to learn from the Alton's published schedules not only the rates between different points, but also the terminal charges, if any, that were to be exacted of them in addition to the rates. We think it is clear that the shipping public were not concerned in what part of an Alton through rate was paid by the Alton to the New York Central or to any owner of tracks that were used in making the through shipment. But if divisions of rates or track rentals were required to be published, we think it is equally clear that a failure to publish could not make a rebate of what is not a rebate, and, on the other hand, that publication could not save what is a rebate from being found to be a rebate. So the aforesaid matter of publication has nothing to do with the case.

Payment by the Alton to the S. & S. Co. was in the guise of a 'refund of terminal charges,' as though the Alton through oversight had collected more than the lawful charges and was rectifying the mistake. But as courts rightly are keen to penetrate an innocent appearing device to reach an illegal transaction, they should also be alert to save a lawful act though it be hid under a false cover. These plaintiffs in error should not be punished for methods of bookkeeping if the false entries represented in fact a lawful arrangement.

The real transaction was the payment by the Alton for the use of the S. & S. tracks in getting S. & S. freight out of the plant to the Belt Line. The consideration was not based on a fixed monthly or yearly rental, or on a percentage of the investment, but was determined by the amount of use measured by wheelage. But rentals on the basis of wheelage are unobjectionable if the parties have entered into a contract which in all other respects is lawful.

This contract was made on the Alton's part through its traffic department. We may know as a matter of common information that contracts respecting right of way, roadbed, and track are usually made through the engineering or maintenance of ways department, and not through freight agents. But, again, these plaintiffs in error should not be punished because the rental was measured by wheelage or because the contract was made by freight agents.

S. & S received back a part of the money they paid the Alton for freight. That fact alone does not prove that the transaction constituted a rebate within the definition of the statute. A railroad may pay its lawful indebtedness to a shipper out of the money the shipper pays it for freight; or a shipper may pay the full freight partially in money and partially in canceled legal demands against the railroad. The statute's definition of a rebate is any device whereby any property in interstate or foreign commerce is transported at a less rate than that published and filed. So if the full rate be paid either in money or in money's worth, the parties cannot be guilty of rebating. Of course, the money's worth part of the payment might itself be used as a device whereby the property would be carried in interstate commerce at less than the published rate; but in this case the presumption must be indulged that the wheelage charge of $1 a car measured the...