Glens Falls Portland C. Co. v. Delaware & Hudson Co.

• Decision Date: 17 July 1933
• Docket Number: No. 173.,173.
• Citation: 66 F.2d 490
• Parties: GLENS FALLS PORTLAND CEMENT CO. v. DELAWARE & HUDSON CO. et al.
• Court: U.S. Court of Appeals — Second Circuit

66 F.2d 490 (1933)

GLENS FALLS PORTLAND CEMENT CO. v. DELAWARE & HUDSON CO. et al.

No. 173.

Circuit Court of Appeals, Second Circuit.

July 17, 1933.

H. T. Newcomb, Nathan Probst, Jr., and Thomas L. Ennis, all of New York City, for appellants.

Cohen, Gutman & Richter, of New York City (Julius Henry Cohen, Kenneth Dayton, and Burton A. Zorn, all of New York City, of counsel), for appellee.

Before L. HAND, SWAN, and CHASE, Circuit Judges.

SWAN, Circuit Judge.

The present suit, brought under section 16(2) of the Interstate Commerce Act (49 USCA § 16 (2), seeks to recover from three defendant railroad corporations damages suffered by the petitioner, hereafter referred to as the cement company, by reason of the collection from it of unreasonable and unlawful freight rates on shipments of cement during the two years preceding August 27, 1926. The cement company manufactured its product at Glens Falls, N. Y., and shipped it by railroad to various destinations in New England. Its shipments moved from Glens Falls to Sidney, N. Y., over the lines of the Delaware & Hudson Company, from Sidney to Campbell Hall, N. Y., over the New York, Ontario & Western, and from Campbell Hall to New England destinations over the New York, New Haven & Hartford. The three railroad companies whose lines comprised this route were defendants below, and are appellants here. It is called the Sidney route. There was another and shorter route from Glens Falls to all the points of destination via Mechanicville, N. Y., over the Delaware & Hudson, the Boston & Maine (not a party to this action), and the New Haven. But no joint freight rates for cement were established over the Mechanicville route during the period in question; all the cement company's shipments going by way of Sidney. In August, 1926, the cement company filed a complaint with the Interstate Commerce Commission against the present defendants and others in which it charged (1) unfair discrimination in rates between Glens Falls and certain favored places within the Hudson and Lehigh districts where were located other cement manufacturers with whom the complainant competed; (2) unreasonable routing because the Mechanicville route was not used; and (3) the collection of unreasonable rates from the complainant during the preceding two years. It asked that the Commission establish just and reasonable rates, direct the establishment of joint rates via the Mechanicville route, and make a reparation order awarding damages. This proceeding was consolidated with others by which other complainants sought lower rates and a revised rate system for the entire Hudson district. No reparation order was sought in the other proceedings. On June 3, 1929, the Commission rendered its report and decision covering all these proceedings (see New England Cement Rates, 155 I. C. C. 601), and this was served on the present defendants. Subsequently on August 14, 1930, a reparation order was entered awarding the cement company the sum of $12,558.63 with interest. A correction which did not affect the amount or date of payment, was made in this order nunc pro tunc on November 14, 1930. There is a dispute whether the reparation order and corrected order were served upon the Delaware & Hudson Company. The other two defendants admit service. The order was not complied with, and this suit followed in December, 1930.

At the trial the cement company introduced copies of the Commission's report and reparation order, made proof of service of the same, and rested after certain data necessary to determine the amount of interest due, if the petitioner was entitled to judgment, had been stipulated. The defendants then offered expert testimony as to the reasonableness of the rates in question. An objection to such evidence being sustained, and no further proof being offered, a verdict was directed for the petitioner in the sum of $17,828.78. To this attorneys' fees were added by the court in the amount of $4,000, and costs in the amount of $30, making the judgment appealed from $21,858.78. The appeal also challenges an interlocutory order by which affirmative defenses pleaded by the defendants were stricken out. See (D. C.) 55 F.(2d) 971.

Upon this appeal the principal point of controversy is whether the defendants are entitled to a trial de novo on the question of the reasonableness of the rates they collected from the cement company. But before considering that issue it will be convenient to dispose of the several special defenses presented by the defendants in their answers and stricken out by the District Court as insufficient in law.

The Delaware & Hudson Company ceased to be a common carrier on April 1, 1930, on which date it conveyed its railroad properties to the Delaware & Hudson Railroad Company in a proceeding reported in 158 I. C. C. 615. Since it was no longer a carrier, the Commission was without jurisdiction, it contends, to enter against it the reparation order of August 14, 1930. These facts it set up in its answer as a special defense. On the same ground it objected at the trial to the admission in evidence of the reparation order, and moved to dismiss the petition for the reason that the District Court had no jurisdiction over it in a suit based on the Commission's void order. These contentions were decided adversely to it below. We think they were rightly decided. The findings of fact which established the liability of the Delaware & Hudson Company had been made on June 3, 1929, before it ceased to be a carrier. The reparation order merely fixed the amount of the damages awarded. Even without specific statutory authority we should agree, for the reasons given below 55 F.(2d) 971, 980-981, that the Commission had jurisdiction to make it; but the matter seems to be put beyond controversy by section 42 of the Act (49 USCA § 42), which permits persons in interest other than carriers to be made parties and subjects them to orders of the Commission.

It is further contended that the reparation order and corrected order were never served upon the Delaware & Hudson Company. Section 16 (5) of the Act (49 USCA § 16 (5) provides that:

"Every order of the commission shall be forthwith served upon the designated agent of the carrier in the city of Washington or in such other manner as may be provided by law."

49 USCA § 50 requires every carrier to designate an agent in Washington, and provides that, in default of such designation, service may be made "by posting such notice or process in the office of the secretary of the Interstate Commerce Commission." Prior to April 1, 1930, the Delaware & Hudson Company had a designated agent in Washington, but when it ceased to be a carrier the authority of such agent was revoked and notice of the revocation filed with the Commission. The same person was designated the agent for the Delaware & Hudson Railroad Company. The reparation order and corrected order were served on this person after revocation of her authority as agent of the Delaware & Hudson Company. Technically she was no longer this defendant's agent, and the statute was not followed; but like technicality points to the conclusion that the statute did not apply because this defendant was no longer a carrier. Apparently no express provision is made for service upon a noncarrier party. 49 USCA § 42. Actual notice received in season would seem to be sufficient notice to such parties. Moreover, the reparation order and corrected order were posted in the office of the secretary of the Commission. While the secretary's certificate states that service was made in this manner upon Central New England Railroad Company (a defendant against whom the suit was dismissed before trial), it is not apparent why this posting would not also constitute service upon the Delaware & Hudson Company under section 50. But in any event the fact that the statute gave an alternative method to service upon the designated agent would indicate that the particular method of notifying the designated agent was not jurisdictional. Since this defendant was properly served with the initial process and the Commission's report, actual notice of the formal order should be enough. The analogy of an injunction which binds a defendant, however he learns of it, is persuasive.

The Ontario & Western pleaded as a separate special defense that the proximate cause of the damage to the cement company was the failure of the other railroad companies to open the shorter Mechanicville route, a matter with which the Ontario & Western had nothing to do, as no part of its lines was embraced within that route. While it is true that the complaint filed with the Interstate Commerce Commission complained, among other things, of the failure to open the Mechanicville route and prayed for the establishment of joint rates for transportation of cement via that route, the claim for reparation was based on the collection of unreasonable rates on shipments via Sidney. As we read the Commission's report, it was upon this theory that reparation was allowed. Besides finding that the failure to open the Mechanicville route was unreasonable and a violation of the act, the Commission made a finding that:

"The rates assailed in No. 18744 for transportation from Glens Falls to points on the New Haven, during two years prior to August 27, 1926, were unreasonable to the extent that they exceeded the rates established on April 12, 1927; that the complainant in that case made shipments during said period to which said rates were applied, and paid and bore the charges thereon; that it has been damaged thereby and is entitled to reparation to the basis of rates established effective on said April 12."

The rates thus referred to were for the long haul via Sidney, and reduced the previous charge of 20.5 cents to 17 cents so as to "equalize" the rates "from Howe's Cave and Glens Falls with those from Hudson and Alsen." The special defense now under consideration is based upon a false...