Title: Atchison, T. & SF Rly. Co. v. State Corporation Comm.

State: kansas

Issuer: Kansas Supreme Court

Document:

182 Kan. 603 (1958)
322 P.2d 715
THE ATCHISON, TOPEKA AND SANTA FE RAILWAY COMPANY, a corporation, Appellee,
v.
THE STATE CORPORATION COMMISSION OF THE STATE OF KANSAS, Appellant.
No. 40,837

Supreme Court of Kansas.
Opinion filed March 8, 1958.
J. Robert Wilson, of Topeka, argued the cause, and Clyde E. Milligan, Joyce R. Tyler and Harold E. Jones, all of Topeka, were with him on the briefs for appellant.
J.B. Reeves, of Topeka, argued the cause, and C.J. Putt, W.E. Treadway and Edwin M. Wheeler, all of Topeka, were with him on the briefs for appellee.
J.W. Lowry, of Atchison, for the City of Atchison and the Chamber of Commerce of Atchison, as amici curiae.
The opinion of the court was delivered by
SCHROEDER, J.:
This is an appeal from a judgment of the district court of Shawnee County in which it found the order of the State Corporation Commission denying the application of The Atchison, Topeka and Santa Fe Railway Company to discontinue trains 55 and 56 between Atchison, Kansas, and Topeka, Kansas, to be unlawful and unreasonable.
For convenience and in the interest of brevity the State Corporation Commission, appellant, will be referred to as the Commission, and the railway company, appellee, as the Company throughout the course of portions of this opinion.
The trial court's findings of fact are more than ample to present the factual situation, and are as follows:
"FINDINGS OF FACT
*608 As conclusions of law the court held:
"CONCLUSIONS OF LAW
The trial court entered judgment in harmony with the conclusions of law and reversed the order of the Commission dated February 22, 1956, with directions to enter an order granting the application on the terms sought by the Company.
The Commission in its brief raises three questions:
Answer to the foregoing questions necessitates reference to certain provisions of the statute prescribing the duties and authority of the district court upon the trial of appeals from orders of the Commission reviewing applications of common carriers to discontinue or make changes in existing train service. The pertinent portions read:
*610 The foregoing sections of the statute make it clear that on review of an order of the Commission involving changes in rates and service the district court in which the proceeding is pending (1) has power to vacate or set aside the order on the ground it is unlawful or unreasonable; (2) is required, upon trial of such a proceeding, to hear the cause upon the questions of fact and law presented by the entire record as certified by the Commission; and (3) is directed and required to find the order under review is either (a) lawful and reasonable, or (b) unlawful or unreasonable. (Union Pac. Rld. Co. v. State Corporation Commission, 165 Kan. 368, 194 P.2d 939.) For a discussion of the terms "unlawful" and "unreasonable" see Southern Kansas Stage Lines Co. v. Public Service Comm., 135 Kan. 657, 11 P.2d 985.
In a case of this type it has been said that the court is not dealing with a purely administrative order of the Commission but one which is judicial in character. (Union Pac. Rld. Co. v. State Corporation Commission, supra.) But in Rock Island Motor Transit Co. v. State Corporation Comm., 169 Kan. 487, 493, 219 P.2d 405, the court did not consider it material or necessary to attempt any finespun distinction between so-called administrative orders and those of a judicial nature. It was more concerned with the scope of review of the district court.
We shall now direct our attention to the Commission's first question. In Rock Island Motor Transit Co. v. State Corporation Comm., supra, this court said:
..............
In Union Pac. Rld. Co. v. State Corporation Commission, supra, this court held that the function of a district court in proceedings for review of an order made by the Commission is limited to the inquiry whether the order made is lawful or reasonable and that in the exercise of that function the court is required to weigh the evidence, review the entire record and base its decision upon all *611 the facts and circumstances contained therein. In doing so it must weigh the evidence solely for the purpose of determining whether such order is reasonable, and only when the district court finds the order of the Commission to be unlawful or unreasonable is it authorized to vacate or set aside the order. Upon doing so, however, the district court is obligated under the statute to make findings of fact and conclusions of law. (G.S. 1949, 66-118k.)
The foregoing cases are cited with approval and followed in Chicago, R.I. & P. Rly. Co. v. State Corporation Commission, 177 Kan. 697, 282 P.2d 405, where this court considered the identical questions raised by the Commission in the instant appeal.
It may be said that an order of the Commission is unreasonable if under all the circumstances it is unfair, unwise and unjust. This question must be determined by the trier of the facts. It is only when such determination by the trier of the facts finds the order so wide of the mark as to be outside the realm of fair debate that the courts may nullify it. The same regard should be given to the informed conclusions of fact made by the Commission. (See, Southern Kansas Stage Lines Co. v. Public Service Comm., supra.)
The Commission contends that the trial court misconstrued its function under the law of the foregoing cases and makes references to Conclusion of Law No. 1. We do not agree. Finding of Fact No. 13 and Conclusions of Law Nos. 8 and 9 must be construed with it and they clearly indicate that the trial court understood its function.
The district court's findings of fact, though more extended, differ from those of the Commission in only a few respects. In the Commission's order it takes the number of one-way trips made by revenue passengers over a period of five years and seven months, which are basic facts in evidence, and arrives at the conclusion that 40,721 passengers, the equivalent of 45% of the population of Atchison and seven other towns, use this branch line train, which is less than 50 miles in length. This is absurd. The trial court found that the passengers per train mile using trains 55 and 56 were at an average high per month in 1955 of 5.9 and a low of 4.5. This finding is based squarely upon the evidence.
The Company argues that the Commission's order could only have been sustained had the district court held as a matter of law that passenger use of these trains, as aforesaid, requires the railway company to continue the operation of these trains at an out-of-pocket *612 loss that amounted to $29,455 in 1954 and $18,059 in the first seven months of 1955.
This raises another question in which the Commission differed from the trial court, the out-of-pocket expenses and losses and the accounting rules and procedures used by the Company in accordance with the system of accounts prescribed by the Interstate Commerce Commission. (In Conclusion of Law No. 6, the trial court recognized the provisions of 49 U.S.C.A., § 20[5].) The Company's expenses in operating trains 55 and 56 were based on an allocation to this branch line on a train-mileage basis from the total expenses of operation of the entire Santa Fe system. The Commission found this unrealistic and seriously discredited the Company's evidence on the expense for the operation of these trains. The Company charges that the findings and order of the Commission on this point of out-of-pocket expenses and losses are an unlawful and unreasonable departure from the law and prior recognition by the Commission of accounting principles and procedure as prescribed by the Interstate Commerce Commission. Be that as it may, the fact remains that on this branch line the revenue derived from passengers using trains 55 and 56 was substantially less than the wages paid to the three crew members employed to operate this train, wholly aside from any and all other operating and overhead expenses.
Another point upon which the Commission differed from the trial court was that of deterioration in service. This involved the change of schedule making the turn-around at Atchison rather than Topeka, Kansas. The Commission ignored the uncontested fact that it would increase expenses by $2,000 per month to operate this train on a Topeka turn-around schedule. (Finding of Fact No. 11.)
Is there public necessity for the operation of Santa Fe's trains 55 and 56? In determining whether a railroad company should be permitted to abandon service presently rendered the public, the paramount factor to be considered is public convenience and necessity. The Commission determined this question adversely to the Company. The principal contention of the Commission on this point is that there is no alternate public passenger service and the Company does not offer a substitute passenger service.
The conclusions of law adopted and applied by the trial court are based solidly on the modern trend of opinion, or philosophy, *613 that passenger trains are operated primarily for the carriage of passengers, and if the public abandons the trains for passenger travel, there is no duty or obligation to continue their operation at a substantial loss. (Conclusion of Law No. 4.) We do not hesitate to declare that we are in agreement with this position.
Today it is a matter of common knowledge that persons who travel on short trips, that is 200 miles or less, will seldom use the train. The primary reason for this is that automobiles have become a necessity. Good highways supported by tax money, good automobiles and a schedule of one's own choosing lead to the use of an automobile rather than the train. Few of those who so travel know or care if the train operates over the route they intend going; they neither know nor care whether the train coach is modern or not; they are not interested in when the train leaves or when it returns. Most people never even inquire as to such matters. They use their own cars. (Texas & New Orleans R. Co. v. Railroad Commission, 220 S.W.2d 273 [Tex., 1949].) We know of no rule that requires a railroad to maintain the operation of trains at great losses where the need for service no longer exists. To require such operation constitutes one of the forms of economic waste which the Commission was created to eliminate. (In re Application of Chicago, Burlington & Quincy Railroad Co., 152 Neb. 367, 41 N.W.2d 165.) In 1952 the National Association of Railroad and Utility Commissioners (of which the Kansas Corporation Commission is a member) formed a special committee on co-operation with the Interstate Commerce Commission to study the railroad passenger deficit. The number one recommendation reported by this committee under the heading "What Should Be Done" is:
The Company does not base its application to discontinue trains 55 and 56 on financial losses alone. It is also based on the fact that the public has abandoned these trains, and that under the *614 modern view, there is no need for a railroad company to suffer financial loss where the use of the train has declined to less than five passengers per train mile.
A sound test to follow in cases such as this is whether the expenses which will be eliminated by discontinuance of passenger service have exceeded to such an extent revenue, which will be similarly eliminated, that the resulting net saving to the railroad will further the public good in greater measure than the loss of passenger service will impair it. (Boston & Maine R.R. v. State, 97 N.H. 380, 89 A.2d 764.)
In a proceeding to discontinue certain trains, the revenue, expenses and losses shown in the operation of a train have a direct bearing upon whether or not public convenience and necessity require the continued operation of any particular train. (St. Louis-San Francisco Railway Company v. State, 301 P.2d 228 [Okla., 1956].)
The trial court found upon the record in this case that public convenience and necessity did not require the Company to continue the operation of motor trains 55 and 56 at out-of-pocket losses in excess of $25,000 per year. Upon all the facts and circumstances presented by the record we cannot say as a matter of law that the question was wrongly decided. This was a branch line of less than 50 miles in length upon which the public had abandoned the passenger service.
The third question raised by the Commission, whether the operation of these trains places an undue financial burden upon the Company or whether the refusal of the Commission to authorize discontinuance deprives the Company of its property without due process of law, is closely interwoven with the previous question. Much of what has already been said applies to this point.
The Commission relies on Chicago, M., St. P. & P.R. Co. v. Illinois, 355 U.S. 121, 78 S. Ct. 304, 2 L. Ed. 2d 292, which states:
The Commission contends that the Company in this case has made no claim that it is operating at a loss or failing to receive a fair rate either on its total investment or upon its investment in the State of Kansas. It relies upon the argument that freight rates have been increased to offset passenger deficits. We observe no merit in this suggestion. If it be true that one of the reasons for allowing increased freight rates was that the Company was compelled to furnish passenger service at a loss, such does not compel the Commission or the court to require a continuance indefinitely of the passenger service after the necessity therefor has been eliminated. If the passenger service becomes unnecessary, the fact that the Company has earnings from freight which might absorb the losses from passenger service is immaterial. (Safford Chamber of Commerce v. Corporation Com'n, 81 Ariz. 226, 303 P.2d 713.)
The federal supreme court has always held that it was the function of regulatory acts to eliminate, not to perpetrate, economic waste. (Purcell v. United States, 315 U.S. 381, 62 S. Ct. 709, 86 L. Ed. 910; and see, State, ex rel., v. Postal Telegraph Co., 96 Kan. 298, 150 Pac. 544.)
If the Company could be compelled to continue passenger service on a branch line simply because it was generally prosperous, a railroad would as a result of such logic stand committed to drains upon its income for costly and unnecessary service until complete bankruptcy intervened. (Public Service Com'n of State of N.Y. v. United States, 50 F. Supp. 497 [1943]; and see, Chicago, B. & Q.R. Co. v. Illinois Commerce Commission, 82 F. Supp. 368 [1949].)
Lest the foregoing statements be misconstrued, we hasten to add that in a proper case evidence of the total net revenue of an entire railroad system may be admitted and considered in the matter of the discontinuance of passenger service, depending on the facts and circumstances of the particular case before the Commission. (See, Chicago, R.I. & P. Rly. Co. v. State Corporation Commission, supra; Boston & Maine R.R. v. State, supra; and Alabama Comm'n v. Southern R. Co., 341 U.S. 341, 71 S. Ct. 762, 95 L. Ed. 1002.)
We hold that the trial court was justified in finding the order of the Commission unlawful and unreasonable. Regardless of schedule, motor trains 55 and 56 have failed to produce sufficient revenues *616 to meet even the wages of the train crew, where the average number of passengers per train mile is only slightly higher than the number of crew men needed to operate the train. Upon all the facts and circumstances presented by the record in this case, it became the duty of the Commission to grant the Company's application to discontinue the operation of its motor trains 55 and 56 between Atchison, Kansas, and Topeka, Kansas.
The judgment of the trial court is affirmed.
HALL, J., not participating.