Northern P. Ry. Co. v. Department of Public Works

• Citation: 217 P. 507,125 Wash. 584
• Decision Date: 18 July 1923
• Docket Number: 17689.
• Parties: NORTHERN PAC. RY. CO. et al. v. DEPARTMENT OF PUBLIC WORKS et al.
• Court: United States State Supreme Court of Washington

217 P. 507

125 Wash. 584

NORTHERN PAC. RY. CO. et al. v. DEPARTMENT OF PUBLIC WORKS et al.

No. 17689.

Supreme Court of Washington, En Banc.

July 18, 1923

Appeal from Superior Court, Thurston County; D. F. Wright, Judge.

Proceeding by the Department of Public Works and others against the Northern Pacific Railway Company and others to establish rates on logs. From a judgment affirming the Department's order establishing a uniform scale of rates, the carriers appeal. Affirmed.

See also, 211 P. 876.

Fullerton J., Main, C.J., and Mackintosh, J., dissenting.

F. M Dudley, Get. T. Reid, C. H. Winders, and L. B. Da Ponte, all of Seattle, H. A. Scandrett, of Omaha, Neb., A. C. Spencer and W. A. Robbins, both of Portland, Or., Frank C. Owings, of Olympia, and Thos. Balmer and Edwin C. Matthias, both of Seattle, for appellants.

L. L. Thompson and Raymond W. Clifford, both of Olympia, and Lyle, Henderson & Carnahan, of Tacoma, for respondents.

PEMBERTON, J.

The Public Service Commission, now the board of public works, on its own petition seeks to establish just and proper rates on logs within the state of Washington. The rates were originally established by the carriers themselves and were discriminating and preferential and lacking in uniformity. On January 25, 1918, by order No. 28 the Director General increased the freight rates 25 per cent. throughout the United States. In the Transportation Act of February 28, 1920 (41 Stat. 456), providing for the termination of federal control, Congress recognized the necessity for higher freight rates and authorized the Interstate Commerce Commission to establish rates which would earn a fair return upon the value of the railway property. A fair return was declared to be 5 1/2 per cent. of such aggregate value and one-half of one per cent. for improvements. Under the power so granted and after an investigation, the Interstate Commerce Commission on July 29, 1920, entered Ex Parte 74, found in 58 Interst. Com. Com'n R. 220, in which the railways of the United States were divided into four groups and increases in rates were allowed as follows: Eastern group 40 per cent.; Southern group 25 per cent.; Western group 35 per cent.; Mountain Pacific group 25 per cent.

The state of Washington being in the Mountain Pacific group and having an increase of 25 per cent. the Public Service Commission in cause No. 5092, for the sake of uniformity, to meet the critical emergency then existing, and to carry out the intent of the 1920 transportation act and the order of the Interstate Commerce Commission, granted an increase of 25 per cent. on all intrastate freight rates and called the attention of the carriers to the discriminatory rates and directed the carriers to readjust said rates upon a proper basis.

No action having been taken by the carriers to adjust the rate the Public Service Commission filed its complaint charging that the rates, rules, regulations, and charges were unreasonable, unjust, discriminatory, prejudicial, and preferential, and ordered that hearings be had to determine what rates should be prescribed for the intrastate movement of logs within the state. After hearing the testimony, the department of public works entered its findings of fact and order establishing a uniform distance scale of rates for the intrastate transportation of logs within the state of Washington. The same was ordered to remain in effect during an experimental period of 12 months, or until further order of the department.

Being dissatisfied with the order of the board of public works, the carrier secured a writ of review from the superior court of Thurston county. That court, after a hearing, entered judgment affirming the order of the Commission, from which judgment the carriers have prosecuted this appeal.

It is first contended that the court erred in holding that the carriers had the burden of proof. The record shows that there was sufficient evidence introduced to make a prima facie showing that the rates were discriminatory and unlawful and the carriers were properly required to sustain the burden in support of their new proposed tariff No. 29 under section 10424, Rem. Comp. Stat., which provides as follows:

'At any hearing involving any change in any schedule classification, rule or regulation the effect of which is to increase any rate, fare, charge, rental or toll theretofore charged, the burden of proof to show that the changed schedule, classification, rule, or regulation, or the increased or proposed increased rate, fare, charge, rental or toll, is just and reasonable shall be upon the public service company.'

It is contended that the board of public works erred in basing its findings upon the cost of transportation determined by an average of the transportation costs of the four appellant railroads; that in determining what are fair, just, reasonable, and sufficient rates for services by any carrier, the costs, revenues, etc., of that particular carrier must be considered, and not the average or combined costs and revenues of a number of carriers; that the department took as a basis of its calculation of transportation costs a unit operating cost supposed to represent the average unit cost upon four different systems, and then sought to determine upon that basis what rates were necessary to give to the individual carrier just, reasonable, and sufficient return for its services, and thus attempted to do that which was an impossibility in logic and prohibited by law.

It is admitted that the cost and revenue of one road would not be the same as the cost and revenue of another road. It is a fact, however, that the four carriers serve practically the same tettitory, and they themselves submitted a uniform distance tariff rate. Railroads serving the same territory must have the same rate. Otherwise the one having the lower rate would secure a larger portion of the traffic. The carriers would not seriously object to a uniform distance tariff rate if it would fully compensate them for their services. This objection will therefore be removed if it is determined that the proposed rates are compensatory.

It is next contended that the department erred in basing its findings as to the cost of transportation of logs upon the average cost of transportation per ton mile upon the systems of the carriers. The mileage of the carriers in the state of Washington as found by the department of public works is about 18 per cent. of the entire mileage, and the log traffic does not move over all of the Washington mileage.

It is contended that the average system cost of transportation of 1,000 tons per mile is much below that average cost of transportation of 1,000 tons per mile within the state of Washington, and still farther below such cost upon divisions carrying the great bulk of the logs.

It is admitted that it is impossible to determine the exact cost of transporting any one commodity. It is claimed that the most approved method of apportioning the entire cost as between different commodities is the car mileage or ton mile basis. The object is to obtain as accurately as possible the actual cost of the transportation. By including the entire system there is included the transportation of every commodity on every part of the system. The transcontinental freight by virtue of its long haul and the transportation within the Mississippi Valley, where level grades prevail and fuel is cheap, moves with comparative cheapness as compared with the transportation in the state of Washington. And it is claimed that the use of such cost included in determining the system ton mile cost as factors to determine the cost within the state of Washington is inadmissible.

It is also claimed that the cost of all transportation includes two factors: First, the cost of picking up and delivering the freight at points of origin and destination, known as the initial and delivery costs; and, second, the line haul; that the initial and delivery costs are unaffected by the length of the haul; that the cost per ton mile increases as the length of haul decreases. It is admitted, however, that the exact ratio between initial and delivery costs and line haul costs has not been determined.

Respondent claims that the branch lines and expenses incurred thereon are peculiarly a feature of terminal division operation; that their existence is essential to afford sufficient volume of traffic to render main line operation possible and profitable; that the intrastate commerce is essentially an aggregation of short hauls while interstate commerce predominates in transcontinental movements; that so far as revenues are concerned, the carriers recognize the composite character of the freight receipts in any state, and by mileage assignments spread these receipts which flow from the operation as a whole over the entire system, and insists that the expense particularly incurred within the state of Washington in interstate assembly and distribution should be extended over the entire system.

It must be conceded that intermediate divisions of transcontinental systems, where such divisions originate little traffic, would be almost devoid of traffic were it not for originating and terminal divisions, and the relations between intrastate and interstate commerce are interdependent so far as receipts and expenses are concerned; that the Washington branch line costs are not out of proportion to other branch line costs; and that the expense of moving logs is approximately the same as that for any other traffic moving in large volumes.

The board found, also, that as a whole more manufactured lumber is being handled by the carriers than the carriers are transporting in the form of logs.

The rate on a branch line cannot be determined by the revenue...