St. Joseph Stockyards Co. v. United States

• Decision Date: 16 April 1932
• Docket Number: No. 204.,204.
• Parties: ST. JOSEPH STOCKYARDS CO. v. UNITED STATES et al.
• Court: U.S. District Court — Western District of Missouri

58 F.2d 290 (1932)

ST. JOSEPH STOCKYARDS CO. v. UNITED STATES et al.

No. 204.

District Court, W. D. Missouri, St. Joseph Division.

April 16, 1932.

W. N. Strack, of Chicago, Ill. (Ross Dean Rynder, of Chicago, Ill., and Culver, Phillip & Voorhees, of St. Joseph, Mo., on the brief), for petitioner.

John Lord O'Brian, Asst. to Atty. Gen. (William G. Davis and Hammond E. Chaffetz, Sp. Assts. to Atty. Gen., Wm. L. Vandeventer, U. S. Atty., of Kansas City, Mo., and Elton L. Marshall, Sol., Department of Agriculture, and J. S. Bohannan, Atty., Dept. of Agriculture, both of Washington, D. C., on the brief), for defendants.

Before BOOTH, Circuit Judge, and SANBORN and OTIS, District Judges.

PER CURIAM.

This is an action in equity brought by the petitioner to enjoin the enforcement of an order made by the Secretary of Agriculture fixing certain maximum rates for services to be charged by the petitioner at its stockyards in St. Joseph, Mo. The order of the Secretary, the enforcement of which is sought to be enjoined, was made by him pursuant to the powers in him vested and the duties imposed on him by section 310 of the Packers and Stockyards Act of 1921 (7 USCA § 211), which is:

"Section 310. Whenever after full hearing upon a complaint made as provided in section 309, or after full hearing under an order for investigation and hearing made by the Secretary on his own initiative, either in extension of any pending complaint or without any complaint whatever, the Secretary is of the opinion that any rate, charge, regulation, or practice of a stockyard owner or market agency, for or in connection with the furnishing of stockyard services, is or will be unjust, unreasonable or discriminatory, the Secretary —

"(a) May determine and prescribe what will be the just and reasonable rate or charge, or rates or charges, to be thereafter observed in such case, or the maximum or minimum, or maximum and minimum, to be charged, and what regulation or practice is or will be just, reasonable, and nondiscriminatory to be thereafter followed; and

"(b) May make an order that such owner or operator (1) shall cease and desist from such violation to the extent to which the Secretary finds that it does or will exist; (2) shall not thereafter publish, demand, or collect any rate or charge for the furnishing of stockyard services other than the rate or charge so prescribed, or in excess of the maximum or less than the minimum so prescribed, as the case may be; and (3) shall conform to and observe the regulation or practice so prescribed."

Acting in accordance with the provisions of this section, the Secretary of Agriculture, on October 9, 1929, on his own initiative, made an order for the investigation of the rates for services charged by the petitioner. Pursuant to that order an extensive hearing was held before an examiner designated by the Secretary of Agriculture. The hearing began December 2, 1929, and was concluded December 19th in the same year. Upon the testimony taken by the examiner, the order here involved was promulgated July 20, 1931. In that order, which was to become effective 45 days after its date, maximum rates to be charged for stockyards services by the petitioner were fixed. The order was predicated upon a fair value of the petitioner's property used and useful in the rendition of the services for which the rates were to be charged as of the year 1928, determined by the Secretary to be $3,382,148, and the volume of petitioner's business during that year. It was determined by the Secretary that, had the rates prescribed by him in his order been in effect in the year 1928, petitioner's net operating income would have been $256,068, or the equivalent of 7.5 per cent. on a valuation of $3,414,247.

After various introductory and formal matters the bill alleges that the rates for services prescribed by the Secretary in his order are not supported by any evidence, are contrary to the evidence and the weight of the evidence, and that, if applied, they will deprive the petitioner of its property without due process of law in violation of the Fifth Amendment. More specifically it is alleged that the Secretary had no authority to make a valuation of petitioner's property, and that the valuation made by him was void in that he erroneously determined the amount of land used by the petitioner in performing its stockyard services, in that he erroneously valued the land which he found was so used, in that he had no authority to determine the amount of land to be used by the petitioner in connection with its stockyard services or what amount of land it should be allowed to hold for expansion purposes, in that he erroneously excluded certain properties from valuation, in that he erroneously excluded from the valuation fixed by him certain properties other than land, in that he erroneously excluded, in arriving at his valuation, organization expenses, in that he erroneously determined the going concern value of the petitioner's business, in that he allowed for depreciation reserve and maintenance amounts less than those to which the petitioner was entitled, in that he erroneously determined the net income of the petitioner, in that the rate of return allowed by him was insufficient, and in that he had no authority to determine what rate of return was reasonable and proper. The bill alleges that the rates for services ordered by the Secretary will afford the petitioner a return of 4.74 per cent. only on the true value of petitioner's property, and that, therefore, the order of the Secretary is confiscatory.

It is further alleged in the bill that on February 11, 1931, the petitioner filed with the Secretary, in the proceeding then pending before him, what was called a "petition for reopening." In that petition was contained the following, among other things:

"Respondent avers that any yardage rate or rates which may be prescribed in this proceeding must be considered in connection with the amount of livestock yarded by Respondent. Respondent avers that the receipts of livestock at Respondent's stockyards have declined materially since the hearing in the above proceeding and that said decline in receipts has decreased substantially not only Respondent's revenue but also its net revenue for rate making purposes.

"Respondent avers that any feed charges which may be prescribed in this proceeding must be considered in connection with the amount of feed sold by Respondent. Respondent avers that the amount of feed sold at its yards has decreased materially since the hearing in the above proceeding, and that said decrease has reduced both Respondent's gross revenue and its net revenue for rate making purposes.

"Respondent avers that its net operating income for rate making purposes has declined since the hearing in the above proceeding, and that Respondent's net operating income for rate making purposes, as it appears in the record in said proceeding, no longer fairly represents the net operating income of Respondent for rate making purposes. Respondent avers that its net operating income for rate making purposes for the year 1930 was not more than $251,353.40. Respondent desires to introduce evidence of its net operating income for rate making purposes for the years 1929 and 1930, which is not of record in the above proceeding.

"Wherefore, Respondent respectfully prays that an order be entered reopening the above entitled proceeding and that said proceeding be set down for further hearing on the subjects set forth above."

It is alleged that this petition for reopening was by the Secretary denied, and in that connection:

"That the findings made by said Secretary are based upon conditions which existed with respect to the business of petitioner, including its income, expenses and other pertinent matters, solely during the year 1928; that the order prescribed in said proceeding by said Secretary is to become effective in September, 1931; that as more particularly appears in said Petition for Reopening, circumstances and conditions, including the nature of the services rendered by petitioner in operating its public stockyards, and its income and expenses in connection therewith, have materially changed since the year 1928; that the net operating income of petitioner for the year 1930 was $251,353.40, which is less than the reasonable net operating income which said Secretary found petitioner entitled to obtain as a fair return upon its property devoted to stockyards use; that said net operating income for the year 1930 is substantially less than the amount found by said Secretary to be the net operating income of petitioner for the year 1928; and substantially less the real and true net income of petitioner for the year 1928; that the action of said Secretary in denying petitioner an opportunity to establish the facts stated in said Petition for Reopening was arbitrary, and that no reason therefor is stated in said Findings, Conclusions and Order; that it was the lawful duty of said Secretary to permit petitioner, prior to his final decision in this case, to offer evidence in said proceeding for the purpose of establishing the allegations of said Petition for Reopening; that by said arbitrary action petitioner has been denied the full hearing in this proceeding required by statute; that the denial of said Petition for Reopening constituted an abuse of power on the part of said Secretary, contrary to the statute; and that said action of said Secretary upon said Petition for Reopening will result, if said order is permitted to become effective, in confiscation of petitioner's property, without due process of law, in violation of the Fifth Amendment to the Constitution of the United States.

"(O) That, as a part of said Findings, Conclusion and Order, said Secretary finds the fair value of petitioner's property used and useful in the rendition of service in connection with its stockyards to be $3,382,148, and that a fair and reasonable...