Steenerson v. Great Northern Railway Company

• Decision Date: 20 October 1897
• Docket Number: 10,402--(69). [2]
• Parties: ELIAS STEENERSON v. GREAT NORTHERN RAILWAY COMPANY
• Court: Minnesota Supreme Court

72 N.W. 713

69 Minn. 353

ELIAS STEENERSON
v.
GREAT NORTHERN RAILWAY COMPANY

Nos. 10,402--(69). ^[2]

Supreme Court of Minnesota

October 20, 1897

The plaintiff, Elias Steenerson, in 1893 filed a complaint with the Railroad and Warehouse Commission, complaining that the tariff of charges of the Great Northern Railway Company for the transportation of wheat, oats, barley and other grains from Crookston, Fisher and East Grand Forks, to the terminals Minneapolis, Duluth and St. Paul, were unjust and unreasonable, in that they were at least one-third too high, and asked that the same be reduced to and fixed at 12 cents per hundred pounds between Crookston and either of said terminals, and between other stations on said railway and said terminals in proportion, or to a just and reasonable rate. The defendant company made answer to such complaint, admitted the existence of charges as alleged in the complaint, and alleged that its rates and charges, "including those in question," were in all respects reasonable and just.

A hearing was had in the matter by the said commission, whereupon an order was made September 8, 1894, reducing and fixing the rates in the manner shown by a schedule prepared by the commission. Thereupon an appeal was taken by the Great Northern Railway Company to the district court of Ramsey county.

When the matter came on for hearing in that court, the Northern Pacific Railroad Company and its receivers petitioned to be allowed to intervene therein on the ground that the said two railroad companies are competitors in the same territory; that both have lines extending from Crookston and the other places named in said complaint to Duluth, Minneapolis and St. Paul; that the grain grown along the lines of said roads can be marketed with equal facility in the market towns on either of said roads, and especially so upon the parallel lines running north from Winnipeg Junction, Fargo and Glyndon; that if the rates then in force upon the Great Northern Railway be reduced, "the grain can be hauled by the farmers and marketed on its line instead of upon the lines of the Northern Pacific railroad, and thereby the Northern Pacific Railroad Company and its receivers will be greatly damaged and injured in its business and occupation of common carrier, and thereby lose a large amount of freight which would otherwise be carried on the line of intervenors' road." Intervenors further alleged that the rates thus existing upon the said two roads between the said points for the said commodities were the same; and, furthermore, that the affairs of the said Northern Pacific Company were in the hands of receivers, and certain mortgages upon the properties were being foreclosed, "because of the inability of said company, on account of loss and failure of earnings of its said line and system of railroads, to meet and pay the interest on the said mortgages as the same has accrued."

Notwithstanding the objections of the plaintiff the court permitted the Northern Pacific Company to intervene and to introduce testimony in support of the allegations of its complaint in intervention.

On September 28, 1895, the court, Charles D. Kerr, J., filed its order reversing the order of the commission. A motion for a new trial was duly made in behalf of the commission and of the state, which was argued before Willis, J., on account of the illness of Judge Kerr, and from the order denying this motion, Elias Steenerson, the state of Minnesota, and the Railroad and Warehouse Commission appealed. Reversed.

The order appealed from should be reversed, and a new trial granted.

H. W. Childs, Attorney General, and Clapp & Macartney, for appellants.

1. The view contended for by the trial court, that in determining the reasonableness of the rate the present value of the railroad property must be taken as the basis, is not supported by judicial authority; neither do we think it consistent with the logic of the situation. Just what constitutes the basis of a reasonable rate never has been and probably never will be fairly and clearly stated in any one single proposition. But among their elements must be business conditions and business principles. Now, it is the uniform history of rates that, as a country developes, rates are decreased, principally on account of competition; yet, at the same time properties actually become more valuable. Take the same acreage of terminals in St. Paul and Minneapolis 20 years ago and to-day, and they would be much more valuable now than then. So it is seen at a glance that, subject to the laws of business, rates do not keep pace with the growth in the value of the railroad properties, but decrease as the properties become more valuable. That the present value of the railroad property is not the basis is determined by Judge Brewer in the Reagan case, 154 U.S. 362, 412. This disposes of the rule as an arbitrary rule that the present value of the road is to be taken as the basis, and also disposes of the rule as an absolute rule that the obligations of the company are to be taken as a basis. See, also, Dow v. Beidelman, 125 U.S. 680.

2. As to the transaction out of which grew the Great Northern issue of stock, we shall insist that, for the purposes of this case, the Great Northern Company and the Manitoba Company are practically one and the same thing, -- the stockholders of the Manitoba, -- and that neither does the contract purporting to have been made between these companies, but in fact made by the stock-holders themselves through their respective representatives, nor does the stock issued by the Great Northern, amount to a factor in determining what is a reasonable rate. That upon that branch of the inquiry, as to the reasonableness of the rate, the only question is, how much have these people actually invested in the railroad property?

3. As to the division of state and interstate earnings, we insist that the true rule is the one adopted practically by the companies themselves, i. e., to divide the interstate business upon a mileage basis, count all cost of operation in Minnesota and fixed charges that are properly chargeable to Minnesota mileage, and set against this all earnings in Minnesota, both on local business and on the interstate business done in Minnesota.

4. We have made no reference, in this brief, to the Northern Pacific, because we believe the public, in fixing a rate on Great Northern traffic in Minnesota, is only required to consider what is a reasonable rate for the Great Northern to charge on Minnesota traffic. Ames v. Union, 64 F. 165, 172; Steenerson v. Great Northern, 60 Minn. 461. It seems too plain to admit of discussion, that if the rate fixed by the commission for the Great Northern is a reasonable rate, its enforcement cannot be restrained simply upon the ground that it would not perhaps be a reasonable rate if fixed by public authority for the Northern Pacific.

5. The trial court failed to find what would be a reasonable rate on the ground that it had no authority to modify the rate. The error of the court was in following the suggestion that determining the fact what is a reasonable rate, under an act declaring that rates shall be reasonable, was equivalent to enacting a law, instead of being merely the determination of a fact.

M. D. Grover, for Great Northern Railway Company.

1. The state contends that the value of the property of the Great Northern as a basis for earnings is the amount of the cash bids on the foreclosure sales in 1879, when the Manitoba Company acquired the property of the St. Paul & Pacific Company and of the First Division Company, and that to this amount should be added what has been expended in the acquisition and construction of additional mileage, equipment, and appurtenances. It is not disputed that the Manitoba Company acquired title to all of the properties, nor that it succeeded to all the rights and franchises of the old companies. This much being admitted, yet it is contended that, as a purchaser, it did not become entitled to the full enjoyment of the fruits of its purchase. Suppose the old companies had made a gift of all their properties to the Manitoba Company, or the owners of all the stock of the old companies had made a gift of it to the Manitoba Company, would it have become the owner of the property and entitled to its full enjoyment, or would the people of the state of Minnesota have acquired the title, and, because of the gift, the authority to deprive the Manitoba Company of its right to use and operate the property at rates which would yield to it a reasonable return upon its cost or value?

2. The traffic of the company is divisible into three classes: A. Traffic both originating and terminating within the state. B. Traffic originating within the state and terminating outside of the state and vice versa. C. Traffic originating or terminating outside of the state, i. e., moving across the state in transit. It is needless to remark that the regulating power of the state is confined to traffic of the first class. All traffic of the second and third classes is either commerce between states or between the state and a foreign country, and in either case is beyond the state's control. Traffic of the first class, having its movement wholly within the state, forms a very small percentage of the traffic moving upon the railways of the Northwestern states. This is true of the traffic of the state of Minnesota, but the company in this case has not objected to an examination of its movement of traffic of all kinds. In fact, its traffic between the Dakotas, Montana, Idaho and Washington and the states east of Minnesota is so large a proportion of the whole that, for the purposes of illustrating its position in this case, it has only attempted to separate the third class of traffic, that is, traffic moving from without across the state, leaving the first and second classes to stand together as strictly state traffic...