Duluth St. Ry. Co. v. Railroad and Warehouse Commission
| Decision Date | 27 December 1924 |
| Citation | 4 F.2d 543 |
| Parties | DULUTH ST. RY. CO. v. RAILROAD AND WAREHOUSE COMMISSION OF MINNESOTA et al. (CITY OF DULUTH, Intervener). |
| Court | U.S. District Court — District of Minnesota |
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The above-entitled cause came regularly on for hearing upon exceptions to the report of the special master heretofore appointed in said cause. The suit is one brought to enjoin the enforcement of an order of the Railroad and Warehouse Commission of the State of Minnesota, fixing rates to be charged by plaintiff in the city of Duluth.
At the outset the contention is again made by the defendants that the suit is premature. This question was passed upon at an earlier stage in this case and it is not necessary to discuss it here at length. The conclusions heretofore reached are adhered to, viz.: That, when the Railroad and Warehouse Commission made and filed its findings and order of July 13, 1922, fixing the rate of fare for plaintiff company, the legislative stage was ended at that point, and the judicial stage was reached; that the hearing before the state district court on appeal which is provided for in section 10 of the act (chapter 278, Laws of 1921 of the State of Minnesota) is judicial and not a continuation of the legislative rate-making process, otherwise the section is void; and, finally, that under such circumstances the street railway company had the right to bring the present suit in the federal court.
As supporting these conclusions may be cited: Bacon v. Railway Co., 232 U. S. 134, 34 S. Ct. 283, 58 L. Ed. 538; Prendergast v. Telephone Co., 262 U. S. 43, 43 S. Ct. 466, 67 L. Ed. 853; N. W. Bell Tel. Co. v. Hilton (D. C.) 274 F. 384; Steenerson v. Railway Co., 69 Minn. 353, 375, 72 N. W. 713; State v. Great Northern Ry., 130 Minn. 57, 153 N. W. 247, Ann. Cas. 1917B, 1201.
See, also, Keller v. Potomac Elec. Co., 261 U. S. 428, 43 S. Ct. 445, 67 L. Ed. 731; Abilene Ry. v. U. S. (D. C.) 288 F. 102; same case, 265 U. S. 274, 44 S. Ct. 565, 68 L. Ed. 1016; Monroe Gas Co. v. Mich. P. U. C. (D. C.) 292 F. 139.
The cases of State v. Macdonald, 26 Minn. 445, 4 N. W. 1107, State v. Flaherty, 140 Minn. 19, 167 N. W. 122, and State v. Koochiching Co., 146 Minn. 87, 177 N. W. 940, are not in my judgment opposed to the foregoing conclusions. The questions taken up and disposed of by the courts in those cases were considered judicial questions, or at least quasi judicial questions.
It is contended by plaintiff that, even though it be conceded that the state district court was clothed with legislative power by the act (chapter 278, Laws Minn. 1921), and that consequently the legislative stage of rate making had not yet ended when the present suit was started, nevertheless the plaintiff was justified in bringing the present suit in the federal court, because it had exhausted its remedy under the state procedure to obtain relief from existing continuing confiscation.
In other words, it is contended by plaintiff that even if an appeal had been taken to the state district court, and if that court had made an order suspending the rate fixed by the Commission, in that event the old franchise rate of five cents would have automatically come into effect under the terms of the act, and that greater confiscation would thus have resulted, and that in view of this situation plaintiff had the right to seek and obtain relief in the federal court.
Plaintiff claims that its contention in this respect is supported by the cases: Love v. Atchison, etc., Ry., 185 F. 321, 107 C. C. A. 403; Okla. Co. v. Love, 252 U. S. 331, 40 S. Ct. 338, 64 L. Ed. 596; Okla. Gas Co. v. Russell, 261 U. S. 290, 43 S. Ct. 353, 67 L. Ed. 659; Pacific Tel. & Tel. Co. v. Kuykendall, 265 U. S. 196, 44 S. Ct. 553, 68 L. Ed. 975.
On the other hand, the defendants contend that the plaintiff has no standing in court to oppose the continuation of the five-cent fare, pending the fixing of a new rate by the proper legislative authority, because plaintiff is bound by its contract to that effect contained in the act. Defendants cite the cases: City of Opelika v. Opelika Co., 265 U. S. 215, 44 S. Ct. 517, 68 L. Ed. 985; St. Cloud Public Service Co. v. City of St. Cloud, 265 U. S. 352, 44 S. Ct. 492, 68 L. Ed. 1050.
I do not find it necessary to pass upon these opposing contentions, in view of what has been heretofore said.
It is further contended by defendants that the present suit was premature, because no test period had been had of the rates fixed by the Commission. A test period, however, is not an indispensable prerequisite. This was determined by the hearing before the court of three judges on the motion for an interlocutory injunction. See City of Louisville v. Louisville Tel. Co. (C. C. A.) 279 F. 949, 956; Prendergast v. Tel. Co., supra.
Turning to the merits: The act (chapter 278, of the Laws of Minnesota 1921) provides:
The Fourteenth Amendment to the Constitution of the United States provides a guaranty against a confiscatory rate. The maximum and the minimum are therefore fixed; within the space between, if there is any such space, the action of the Commission is unassailable.
The proceedings before the special master and in this court are not for the purpose of fixing a rate, but to determine whether the rate fixed by the Commission is confiscatory. In Pacific Gas & Electric Co. v. City and County of San Francisco, 265 U. S. 403, 44 S. Ct. 537, 68 L. Ed. 1075, United States Supreme Court, June 2, 1924, the court said:
Nevertheless, it is held that the parties are entitled to the independent judgment of the court upon the findings and conclusions of the Commission. Bluefield Co. v. Pub. Ser. Com., 262 U. S. 679, 689, 43 S. Ct. 675, 67 L. Ed. 1176.
With these rules in mind, consideration has been given to the various matters covered by the order of the Commission and reviewed in the findings and report of the master. The findings of the master are attached to this decision for convenience of reference.
Both the company and the city have taken exception to each of the findings (except the formal ones), and these general exceptions include subordinate exceptions to almost all of the items going to make up the rate base, and to very many of the items of the operating expenses.
It is obviously impossible, without unduly extending this decision, to discuss each of these numerous exceptions; they have all been considered, but only the more important will be discussed.
The Rate Base and Its Items.
The valuation fixed by the Commission was $4,599,978.22. The valuation was made as of December 31, 1921. The master in his report states:
"On the hearing before the Commission and here, the engineers of the respective parties agreed upon an inventory of the physical properties; also, excepting land, the cost of reproducing those properties, upon four different bases, but reached no agreement as to the value of the land, the power contract, expenditures not apparent in the inventory, engineering and superintendence, administration, organization and legal expenses, taxes during construction, interest during construction, working capital, cost of financing, development cost or going value."
These agreed bases were: (1) Pre-war prices current 1915, $3,488,161. (2) Average ten years, 1911-1921, $4,864,437. (3) Current prices June, 1921, $6,308,966. (4) Original or investment cost, $3,487,020. (I. e. "The estimated cost of reproducing the property as of July 1, 1921, using prices in effect when the property was installed or purchased.")
The items of the Commission's valuation were as follows (as of July 1, 1921):
Physical property (undepreciated)
excluding land ...................... $3,940,000.00
General overheads ..................... 550,000.00
Power contract ........................ 110,000.00
_____________
$4,600,000.00
Depreciated value of
the three foregoing
items, rate 17% ........ $3,818,000.00
Lands .................... 140,000.00
Working capital, materials
and supplies ........... 135,000.00
Going concern ............ 500,000.00
_____________
$4,593,000.00
Additions to December
31, 1921 ............... 6,978.22
_____________
Total December
31, 1921 ........... $4,599,978.22
The master, after considering these various items and the evidence pertaining thereto, for the purpose of test and comparison, built up independently from the evidence a cost of reproduction, which he found to be $5,138,504.61. He also estimated the original cost as well as he was able from the evidence at $4,222,573. He found the valuation for taxation as estimated by the public authorities to be $3,437,436; and he found the capitalization of the company:
Bonds (5%) .......... $2,519,882.00
Stock ............... 1,200,000.00
______________
Total ..................... $3,719,882.00
After considering all the evidence, the master reached the conclusion to adopt the figures fixed by the Commission,...
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