Thermoid Western Co. v. Union Pacific R. Co.

• Decision Date: 19 September 1961
• Docket Number: No. 9324,9324
• Citation: 365 P.2d 65,12 Utah 2d 256
• Parties: d 256 THERMOID WESTERN CO., Norman Thompson Lumber & Hardware Co., Inc., Utah Poultry & Farmers Cooperative, Utah Lumber Co., and Stokermatic Co., on their own behalf and on behalf of other persons, corporations, and associations similarly situated, Plaintiffs and Appellants, v. UNION PACIFIC RAILROAD COMPANY, The Denver and Rio Grande Western Railroad Company, The Western Pacific Company and Bamberger Railroad Company, Defendants and Respondents.
• Court: Utah Supreme Court

Page 65

365 P.2d 65

12 Utah 2d 256

THERMOID WESTERN CO., Norman Thompson Lumber & Hardware Co Inc., Utah Poultry & Farmers Cooperative, Utah Lumber Co. and Stokermatic Co., on their own behalf and on behalf of other persons, corporations, and associations similarly situated, Plaintiffs and Appellants, v. UNION PACIFIC RAILROAD COMPANY, The Denver and Rio Grande Western Railroad Company, The Western Pacific Company and Bamberger Railroad Company Defendants and Respondents.

No. 9324.

Supreme Court of Utah.

Sept. 19, 1961.

Pugsley, Hayes, Rampton & Watkiss, Salt Lake City, for appellants.

A. U. Miner, Bryan P. Leverich, S. N. Cornwall, Wood R. Worsley, Salt Lake City, for respondents.

CROCKETT, Justice.

Plaintiff shippers sued defendant railroads to recover alleged overcharges in freight rates. From a rejection of their claims plaintiffs appeal.

The freight charges in question represent a 15% increase in intrastate freight rates in Utah collected by the railroads during 1956, 1957 and 1958 in accordance with an order of the Interstate Commerce Commission which had been made after the Utah Public Service Commission had denied an application for such increase. For brevity we refer to those commissions as I. C. C. and Utah P. S. C.

In 1951 the major railroads of the United States applied to the I. C. C. for a general increase of 15% in interstate freight rates. After an investigative proceeding known as Ex Parte 175 the application was granted. In order to keep their rates comparable the defendant railroads concurrently made application to the Utah P. S. C. for a similar 15% increase in intrastate freight rates. That commission denied the application on the ground that the evidence produced at the hearing did not 'afford the commission sufficient information upon which it can determine whether or not the revenue derived by the railroads from Utah intrastate traffic is inadequate.' Instead of pursuing the matter further before the Utah P. S. C. the railroads applied to the I. C. C. to order such an increase in Utah intrastate rates on the theory that they were so low as to place an undue burden on interstate commerce. After a hearing the I. C. C. so found and directed that the Utah P. S. C. allow the increase to be put into effect. The latter commission declined to do so, and a final order allowing such increase was issued by the I. C. C. The defendant railroads filed tariffs with the Utah P. S. C. to make the intrastate rate increases effective June 22, 1956, and thereafter proceeded to collect such charges. The Utah P. S. C. and the Utah Citizens Rate Association instituted action in the U. S. District Court for Utah to set aside the I. C. C. order. A three-judge court rejected the complaint upholding the action of the I. C. C. Plaintiffs then took a direct appeal to the United States Supreme Court ¹ which reversed the three-judge court and remanded the cause to the Commission for further proceedings.

The plaintiff shippers contend that the action of the United States Supreme Court in reversing the district court had the effect of declaring that the order of the I. C. C. allowing the rate increases was void; that they are therefore entitled to recover the increased charges which they had paid pursuant to that order; whereas the defendant railroads contend that the order was valid until declared otherwise by that court; that the charges were lawfully collected and that therefore under the rules of both law and equity they are entitled to retain them.

The doctrine out of which the authority of the I. C. C. to regulate railroad rates on operations within the state derives appears to have been first announced in the case of Houston E. & W. T. RR. Co. v. United States. ² Its rationale is that where a carrier is operating both interstate and intrastate, and rates upon the latter are so low that they do not bear their share of the carrier's expense of operation, this in turn has to be borne by the interstate portion of the carrier's business, and thus the intrastate operation places a burden on interstate commerce. In such circumstances it was reasoned that under its prerogative of regulating interstate commerce the I. C. C. had the authority to order the intrastate rates corrected to remove such burden so that interstate trade would not be 'left to be destroyed or impeded by the rivalries of local governments.' ³ The rule was adopted by act of Congress, 49 U.S.C.A. Sec. 13, subsections (3) and (4).

The plaintiffs argue correctly that for the I. C. C. to regulate freight charges within a state is an intrusion into the state's affairs and that such action cannot be justified merely because of disparity or inequality in rates, but only where it is clearly shown that the requirement of the act is met that there is an 'undue, unreasonable, or unjust discrimination against, or undue burden on, interstate * * * commerce.' ⁴ The courts consistently acknowledge the merit of this proposition and the importance of respecting the sovereignty of the state and the prerogatives of its functioning authority in such matters. In the case of Palmer v. Commonwealth of Massachusetts ⁵ the United States Supreme Court said: '* * * in construing legislation this court has disfavored inroads by implication on state authority and resolutely confined restrictions upon the traditional power of states to regulate their local transportation to the plain mandate of Congress.' (Citing authorities.) In North Carolina v. United States, ⁶ the court further observed that 'a scrupulous regard for maintaining the power of the state in this field has caused this Court to require that these Interstate Commerce Commission's orders giving precedence to federal rates must meet a 'high standard of certainty." (Citing authorities.)

With the above sentiments we are in hearty accord. But that does not impel a conclusion that the plaintiffs are correct in their charge that the I. C. C.'s order was entirely void because it had no jurisdiction. It is to be remembered that generally where a court or administrative body is dealing with a controversy of the kind it is authorized to adjudicate, and has the parties before it, it has jurisdiction. And jurisdiction does not depend upon the regularity of the exercise of its power or the correctness of decisions made. ⁷

As indicated above, as a result of the Houston case and the enactment of its rule into law, it is not to be disputed that under proper circumstances the I. C. C. has the authority to make a corrective order. ⁸ Giving support to the thought that its original order increasing rates was not an utterly void act but had some semblance of propriety is the fact that it was sustained by the federal district court. The manner in which the case was disposed of by the U. S. Supreme Court and proceedings subsequent to its remand are also significant. If that court had regarded the proceeding before the I. C. C. as entirely void, in all likelihood it would have so stated and that would have ended the matter. But it did not do so. Nor does the opinion reflect a view that facts did not exist which might justify such an I. C. C. order. From the general language used, 'that certain findings of the Commission lacked sufficient support in the evidence,' the inadequacy appears to have been that the evidence then presented did not sufficiently demonstrate that the Utah intrastate rates so failed to bear their fair share of the total operational costs as to place the undue burden on interstate commerce requisite to justify intervention by the I. C. C. ⁹ This, and the remand to the Commission 'for further proceedings in conformity with this opinion' does not have the ring of an adjudication that the I. C. C. had no jurisdiction so that its order was void. What it does show is that although the Supreme Court would not sustain the order on the record then before it, it would remand to the I. C. C. to take further proceedings to investigate the facts, and then make such order as is deemed advisable. These subsequent happenings are also important to note: upon the further proceeding and the taking of additional evidence, the I. C. C. again found the Utah intrastate rates so low as to place an undue burden on interstate commerce; it again ordered the increase in freight rates; the order was again attacked by direct appeal to the U. S. Supreme Court; and that court, since the argument of the instant case to this court, has now affirmed the I. C. C. order granting the 15% increase in freight rates. ¹⁰

The plaintiffs have placed considerable reliance on a case cognate to this one brought by another shipper, Structural Steel & Forge Co. v. Union Pacific RR. Co. ¹¹ decided by the Tenth Circuit Court of Appeals wherein the cause was remanded to our state court for trial. Plaintiffs place emphasis on this language: '[The] complaints state a claim [upon] which relief can be granted under the laws of the State of Utah * * *. The * * * reference to the void or vacated order of the Interstate Commerce Commission as a basis for the charges, was not an essential ingredient of the claim for restitution.' They argue that the remedy they pursue in the instant case is strictly legal, based on the proposition that the increased rates were illegal under Utah law when they were collected, whereas the cases from the federal courts relied upon by defendants, and referred to in this opinion, are proceedings in equity. We see no reason for such distinction and are not persuaded by that argument. We also observe that the Circuit Court did not, as plaintiffs seem to assume, regard the I. C. C. order as void, but referred to it as either 'void or vacated.' Further, that court plainly and discreetly refrained from presuming to predetermine the matter for the state court by stating in the opinion, '* * * the subject matter of these actions [may be] unsupported by any valid order. In which event, the right to prevail would depend upon...