Steenerson v. Great N. Ry. Co.

• Decision Date: 20 October 1897
• Citation: 69 Minn. 353,72 N.W. 713
• Parties: STEENERSON ET AL. v GREAT NORTHERN RY. CO.
• Court: Minnesota Supreme Court

69 Minn. 353

72 N.W. 713

STEENERSON ET AL.vGREAT NORTHERN RY. CO.

Supreme Court of Minnesota.

Oct. 20, 1897.

(Syllabus by the Court.)

1. Under chapter 10, Gen. Laws 1887, as amended by chapter 106, Laws 1891, the state railroad and warehouse commission, when reducing rates on the complaint of any one that rates between certain points on a certain railroad are too high, may, for the purpose of preventing discrimination by its own acts, reduce the rates on the whole line or system.

2. The question whether the rates for transportation fixed by the state railroad and warehouse commission are unreasonable and confiscatory is not determined by the fact that the income under the rates as so fixed will not pay the amount of the fixed charges of the railroad. Neither can the amount at which the railroad sold years ago on mortgage foreclosure sale be taken as the basis on which to determine what are reasonable rates, but that question is determined by ascertaining what, under all the circumstances, is a reasonable income on the cost of reproducing the road at the present time.

3. Under said chapter 10, as so amended, the burden is on the railroad company to show that the rates fixed by the commission are unreasonable.

4. Held, the fixing of rates is a legislative or administrative act, not a judicial one, and under the constitution the court cannot place itself in the shoes of the commission, and try de novo the question what are reasonable rates; and on appeal under said statutes the court can review the acts of the commission only so far as to determine whether the rates fixed by it are unreasonable and confiscatory, and to what extent, in much the same manner as an appellate court determines whether or not the verdict of a jury is excessive, and to what extent.

5. On appeal from the commission the court should take judicial notice of all those general matters of which the commission should have knowledge, and on which it would act without proof thereof made on formal hearing.

6. Evidence examined in the light of the court's findings, for the purpose of ascertaining what it would cost to reproduce the terminals of the Great Northern system at Minneapolis and St. Paul, and what it would cost to reproduce the rest of the lines of that system within this state.

7. Where the market price of urban or suburban property in or near a rapidly growing city is higher than is warranted by any annual income which can be obtained from any use to which the property can at present be put, and such excess in market value is caused by the anticipation of still higher prices in the future, held, a reasonable annual income on the cost of reproducing railroad terminals out of such property is less than a reasonable income on the cost of reproducing other portions of the road, which, when reproduced, are not likely to increase in value. Held, the public, and not the courts, must be the judge of whether or not such property will increase in value in the future, and, if so, how much. What is the lowest rate of annual income on the cost of reproducing such terminals in Minneapolis and St. Paul, which the courts would uphold as not being confiscatory, is not decided; but it is held that a net income of 2 1/2 per cent. per annum on such cost is, under the circumstances, a liberal income.

8. The great fall in the last few years in rates of interest, and in what are reasonable rates of income on capital invested, noticed, and the reasons for such fall stated. Held, a net income of 5 per cent. in 1894 on the cost of reproducing all of said railroads except the terminals was not, under the circumstances, unreasonable or confiscatory.

9. The railroad lines in question extend beyond the state, and, for the purpose of determining the net earnings of the part of the lines within this state, the different methods proposed by counsel for apportioning the gross earnings among the states is considered. Held, the gross earnings on the through traffic extending across this state and into other states should not be apportioned on the “mileage basis,” as that would give Minnesota the benefit of the higher rates which the carrier is entitled to charge in the more thinly-settled country further west, where the traffic is lighter. Held, further, such gross earnings cannot be apportioned on the theory that the patrons of the part of the lines within this state are not entitled to the benefit which should naturally come to them from the fact that just beyond the borders of this state there is a large area of fertile territory which furnishes a large amount of railroad traffic, which co-operates with similar traffic within this state to make reasonable rates lower than they otherwise would be; and a railroad which extended from St. Paul and Minneapolis or Duluth to the west line of the state, and there terminated, without connections or feeders beyond, would not be an enterprise planned or conducted on business principles.

10. When any feeder or extension, portion of a railroad line or system, is an incumbrance on the rest of the line or system, so that the rest of the line or system would at the same rates produce more net income if such portion did not exist (that is, if all the gross earnings on all the traffic passing over such portion, and on the whole length of the haul on such traffic, will not pay the operating expenses on such traffic for the whole length of such haul, and pay for the wear and tear on the line or system caused by such additional traffic, and also pay a reasonable income on the cost of reproducing such portion of the line), and these conditions are not of a temporary character, but are the result of building the feeder or extension where there was not sufficient business to justify its existence, then such portion of the line is not self-supporting, but is an incumbrance on, and not a feeder of, the rest of the line or system, and, in determining what are reasonable rates for the rest of the line or system, such portion may be rejected. Held, under the statute, the burden was on the railway company to show that the western portion of its line was self-supporting.

11. Held, under the statute, the burden was on the railway company to show what portion of the gross earnings on through business should be apportioned to Minnesota; that it failed to maintain this burden, and on the evidence, therefore, failed to prove that the rates fixed by the commission are confiscatory.

12. The evidence examined for the purpose of ascertaining as near as possible the cost of reproducing the whole of the lines and terminals, and held, that the income on the same in 1894, with the rates as reduced by the commission, would produce 2 1/2 per cent. net income on the cost of reproducing the terminals, and 5 per cent. net income on the cost of reproducing the rest of the road, and that, under the circumstances, the same is a fairly liberal income.

13. There are a number of feeders and portions of railroad lines which are separately incorporated, but which in fact form parts of the railway system of the Great Northern Railway Company. There is also a steamship line on the Great Lakes, and a very valuable coal mine in Montana, each of which is separately incorporated. All or nearly all of the stock of each of these other corporations is owned by the Great Northern Railway Company, and it or its officers manage and control all of these other corporations. The profits of each of them depend almost wholly on the division of profits on business in which it and the Great Northern Railway Company are jointly concerned, and such division is a mere matter of bookkeeping. Some of these other corporations appear by the reports of the Great Northern Company to have made very large net profits during the year in question. Held, the burden was on the Great Northern Railway Company, in this case, to show that the division of profits between it and these other corporations was fair and reasonable, and it failed to maintain that burden.

Appeal from district court, Ramsey county; John W. Willis and Charles D. Kerr, Judges.

Elias Steenerson, the state of Minnesota, and others appeared before the railroad commission, which reduced the rates on grain on the lines of the Great Northern Railroad; and from this order the railway company appealed to the district court, and from a reversal of the order the commission appeals. Reversed.

H. W. Childs, Atty. Gen., and Clapp & MacCartney, for appellants.

M. D. Grover, for respondent, Great Northern Ry. Co.

Frank B. Kellogg and Davis, Kellogg & Severance, for receivers of Northern Pac. R. Co.

CANTY, J.

1. Chapter 10, Gen. Laws 1887, as amended by chapter 106, Laws 1891, provides that in fixing rates of transportation the state railroad and warehouse commission may act upon the complaint “of any person, firm, corporation or association, or any mercantile, agricultural or manufacturing society, or any body politic or municipal organization.” It further provides: “If the tariffs of rates, fares, charges and classifications so complained of shall be found by the evidence to be unequal, or unreasonable, the commission shall state wherein they are unequal or unreasonable, and shall make a tariff of rates, fares, charges and classifications which shall be substituted for the tariff complained of.” Steenerson appeared before the commission, and alleged that he was engaged in shipping grain over the railroad of the Great Northern Railway Company from the stations of Crookston, Fisher, and East Grand Forks to Minneapolis and Duluth, in this state, and that the rates between these points were too high. After summoning the railway company and having a hearing as provided by the statute, the commission made an order reducing rates on grain on all the lines of the railway company within the state. From this order the railway company appealed to the district court, and after a hearing on the appeal the court reversed the order of the...