#### JAMES A. BAKER, RECEIVER OF THE INTERNATIONAL & GREAT NORTHERN RAILWAY COMPANY v. THE UNITED STATES.

[No. 142-A.

Decided June 5, 1922.]

*On the Proofs.*

*Railroad, rates; interterritorial agreements; withdrawal of party rates.*— The plaintiff railway company, together with other railway companies, enters into an agreement with the Army, Navy, and Marine Corps by which the Government is given a substantial advantage in rates over the general public, and before the agreement becomes effective the plaintiff company withdraws certain advantageous party rates, and the Government, instead of withdrawing, as it might have done, from said agreement, continues to take advantage of the rates under the same for nearly two years, when the comptroller rules that the said agreement may be construed so as to allow the Government to take advantage of said party rates, and the auditor thereupon makes certain combinations of party and individual rates and corresponding deductions from plaintiff’s bills for transportation. *Held,*that the plaintiff perpetrated no fraud upon the Government by withdrawing such party rates and is entitled to recover the amount of said deductions.

*The Reporter's*statement of the ease:

*Mr. F. Carter Pope*for the plaintiff.

*Mr. Perry W.*Howard, with whom was *Mr. Assistant Attorney General Robert H.*Lovett, for the defendant.

The following are the facts of the case as found by the court:

I. Plaintiff is the receiver, duly appointed, qualified and acting of the International and Great Northern Railway, a corporation organized and existing under the laws of the State of Texas, and has always been loyal to the United States and has never voluntarily aided or abetted its enemies.

For many years plaintiff has operated the line of railways in the State of Texas formerly operated by said corporation, doing business as a common carrier of passengers and freight for hire and reward under tariffs issued by himself and his connections duly published and filed with the Interstate Commerce Commission according to law.

*329II. At various times prior to the dates of the transportation hereinafter referred to railroad carriers of the United States generally, including plaintiff, entered into agreements with the United States on the subject of fares and allowances for the transportation of military traffic, the said agreements being variously entitled “interterritorial military agreement,” “interterritorial military arrangement,” “western military agreement,” etc. Said agreements were executed on behalf of the carriers by their duly authorized agents and on behalf of the United States by the Quartermaster General of the Army, the Chief of the Bureau of Navigation of the Navy, and the Quartermaster, United States Marine Corps, by authority of the heads of the War and Navy Departments. All of said agreements were in effect during the periods hereinafter referred to and at the dates of the transportation hereinafter described, and each of them contains provision relative to the construction of net fares and allowances and the use of party fares in the transportation of military passengers.

Article I of the western military agreement, effective July 1, 1916, provides that:

“ the fares and routes herein shall be revised whenever necessary from time to time in accordance with increases or decreases in commercial fares from starting point to destination, as filed with the Interstate Commerce Commission, and such increases or decreases in the net fares shall become effective on the same dates as the revised commercial fares.”

Said western military agreement, effective July 1, 1916, also provided as follows:

“ RULES AND REGULATIONS.

“(4) The fares authorized herein shall be five (5%) per cent less than the properly constructed net fares between competitive points, with a maximum reduction of one dollar and fifty cents ($1.60) per capita.

$ ‡ ‡

“(9) Party fares (where authorized) apply to parties traveling together on one party ticket.

“(a) Party fares may be used as factors in constructing through net fares *to and from central, trunk*line, *southeastern, and New Englcmd*territories, in the understanding that *330the basing points shall be Chicago, St. Louis, Memphis, Vicksburg, and New Orleans only. Neither two or more party fares, nor a party and an individual fare, east or west of the gateways named, may be combined in establishing a basing fare to or from the basing point. Party fares used to and from such basing points named must be authorized as one through party fare to or from such basing point, as the case may be. A party fare or an individual fare, published as one through fare to or from the basing points named, may, however, be combined with authorized individual fares east or west of such points in making through net fares between the eastern and western territories described, except that where through fares of like class are published' they shall be used in all cases in establishing through net fares. *All fares used in establishing net fares must be lawfully on fule with the Interstate Commerce Commission.*

*“(b)*In the construction of net military fares having origin and destination *within the territory west of and including*Chicago, *St.*Louis, Memphis, *Vicksburg., and New Or*leans, party fares to or from St. Louis and Kansas City only may be combined with party fares to and from those gateways only, and party fares to and from St. Louis and Kansas City may be combined with individual fares to and from those gateways only. Two or more party fares, nor a party fare and an individual fare, on either side of St. Louis and Kansas City, may not be combined in establishing the basing fare to or from St. Louis or Kansas City.

*“(c)*Net fares established on combinations made under sections *(a)*and *(b)*apply Ada usual one-way ticketing routes carrying short-line fares, or via routes specifically equalizing net fares so made, but shall be .restricted to usually traveled routes for military traffic from starting point to destination.

*“(d)*Where party fares are.used in the territories and upon the bases outlined in sections *(a)*and *(b)*herein, the same shall be net cashed in the usual way via rate-making gateway only, but whei’e such fares are used for any part of the distance in the territory west of Chicago, St. Louis, Memphis, Vicksburg, and New Orleans, under sections *(a)*and *(b)*herein, the five per cent allowance to the Government shall not apply to any part of the through fare or protion, either party or individual fare factor, so far as western carriers are concerned.

*“(e)*The intent of this agreement is that where through fares are published no combinations of fares whatsoever are to be made, except as specified in sections *(a)*and *(b)*hei'ein.”

*331Another of said agreements, designated “ interterritorial military arrangement,” dated December 26, 1916, effective January 1, 1917, contained the following provisions:

“ IV. NET FARES AND ALLOWANCES.

“(1) (a) The fares applicable under this arrangement will be the lawful commercial fares as on file with the Interstate Commerce Commission from starting point to destination at time of movement (see exceptions, Section Y), less lawful land-grant deductions, properly established, less five per cent (5%), the five per cent (5%) allowance not to exceed the maxima allowances or exceptions as specified in Section VI. Government fares so established will apply to all military traffic as described in Section III, including special train and special car movements as well as individual and party movements. (See Section XI.)

$ # * $ $

“ (4) Net fares will be increased or decreased as commercial fares filed with the Interstate Commerce Commission, from which said net fares are derived, are increased or decreased ; and net fares will also be increased or decreased as the division bases of commercial fares from which derived are changed and the proportions are thus increased or decreased; all changes in net fares to become effective simultaneously with the changes in commercial fares (or changes in divisions thereof) from which such net fares are derived.

$ $ $ $ $

“ V. PARTY FARES.

“ BETWEEN WESTERN TERRITORY AND C. 3?. A., N. E. P. A., S. E. P. A., AND TRUNK DINE TERRITORIES.

“ Method of constructing net fares by use of party fares: For military traffic moving from territory east of Chicago, St. Louis, Memphis, Vicksburg, and New Orleans to territory west thereof, or vice versa, authorized party fares to ancl from the gateways named may be used in the construction of through net fares, in the understanding that the basing points will be Chicago, St. Louis, Memphis, Vicksburg, and New Orleans only.

“ *Neither two or more party*fares, nor a party fare and an individual fare east or west of the gateways named, may be combined in establishing a basing fare to or from the *332basing point. Any party fare used to or from the basing points named must be authorized as one through fare to or from such basing points, as the case may be. *A party fare*or an individual fare *published as one through fare to or from the basing points named*may, however, be combined with authorized individuals fares east or west of such points in making through net fares between the eastern and western territories described, except that where through fares of like class are published they shall be used in all cases in establishing through net fares; all fares used in establishing net fares must be lawfully on file with the Interstate Commerce Commission.”

III. During the fall of 1916 and in the year 1911 the plaintiff, at the request of the proper officers of the Army and Navy, furnished the transportation set forth in Paragraph V of the petition and in the appendix thereto, for which, except in a few instances, it rendered its bills to the disbursing and accounting officers of the War and Navy Departments at the rates due under sections 4 and 9 of the western military agreement effective July 1, 1916, and under Sections IV (par. (1) (a)) and V of the interterritorial military arrangement effective January 1, 1917, but the bills were reduced by the disbursing and accounting officers in conformity with a decision of the Comptroller of the Treasury of May 10, 1918, in the Chicago, Milwaukee & St. Paul appeal, reported in 24 Compt. 663. In said comptroller’s decision it was held that the withdrawal of certain party fare tariffs to and from St. Louis and Kansas City, which were recognized points for construction of through party fares, operated to relieve the Government of certain restrictions effective in the arrangement as to military traffic beginning July 1,1916.

The decision recites the fact that “ the party rates from St. Louis and Kansas City to Texas points were canceled by notice issued May 11, 1916, to be effective June 15,1916, and the rates from * * * Texas were canceled by notice issued May 25,1916, to be effective July 1,1916.”

That is to say, combinations of party fares and of party fares and individual fares were made by the disbursing and accounting officers without regard to the terms of the mili*333tary agreements, and the reductions in claimant’s bills were so accomplished.

IV. The reductions accomplished as stated in Paragraph III of these findings from claimant’s bills were, in part, as follows:

BUI. War Department: 9719. 9722. 9723. 9731 . 10758. 10772. 12687. 12689. 1689.. 2690. 3693... 12686... 12686... 8672.... 9777... 9777... 9777.... 0718.... 9720.... 3692... 3399.... 5371 4654.... 4658... 6643.... 6646.... 7627.... 7640.... 9776-A.. 9775.... 9775. Transportation request. WQ 37125 37132 37134 147504 144809 144811 144813 45163 45170 120471 120474 120467 120468 120469 120470 61387 61545 61548 61547 148277 285751 285753 285757 285761 285763 285765 285759 285755 648542 648490 372046 444006 407272 407266 407268 37121 37127 69910 69908 69957 350082 350084 285928 341200 289026 289030 359616 370590 369842 445263 445824 359776 359778 359760 Amount. $1,136.29 946.56 1,052.80 253.76 5,945.80 1,644.11 160.55 1,431.43 401.40 6,476.14 719.60 34.75 182.52 850.63 11.13 68.48 19.20 1.130.94 619.74 1.275.95 1,244.25 1,499.02 321.20 9.24 2,481.39 709.80 1,779.36 311.52 287.37 147.34 .44 33,152.71 Record reference. 14 14 14 14 14 14 14 14 14 14 14 14 14 14 14 15 15 15 15 15-16 16 16 16 16-17 17 17 17 18 19-20 Total for War Department.

*334Transportation request. Amount. Record reference. N 58154 58215 58223 58230 58235 58244 58246 58263 58271 58287 58315 58322 58327 58319 58353 58408 58419 58128 58437 58447 58453 58470 58489 58494 58374 58386 58395 110022 110052 110103 110152 110166 110178 110210 S3.30 16.02 10.68 24.92 9.79 22.25 25.81 26.70 21.36 24.03 24.92 24.92 19.58 11.57 14.24 14.24 16.91 9.79 41.83 24.03 8.90 38.69 14.24 16.91 27.59 30.26 23.14 20.47 11.57 17.80 13.35 22.25 10.68 9.79 632.53 33,152.71 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 22 23 23 23 23 23 23 23 23 23 23 23 23 23 23 33,785.24 Bill. Navy Department: 4146. 4666. 5384. Total for Navy Department. Total for War Department. Grand total.

V. Besides the transportation referred to in the foregoing finding, the plaintiff also furnished during the year 1917 the following transportation to the War Department, for which it claimed and was paid the amounts respectively stated per capita:

VI. In addition to the matter hereinbefore quoted from the Interterritorial Arrangement effective January 1, 1917, *335the said arrangement which was in effect at the time of the movements described in Finding V, contained the following provisions:

“ IV. NET FARES AND ALLOWANCES. *****

“ (k) (1) The Long Island B. B. will not make nor participate in any allowances. On interline business via New York, through fares will be made over New York by adding Long Island B. B. local fares to the New York fares charged the U. S. Government.

“vi. ALLOWANCES.

“The following allowances, with specified maxima and exceptions, as referred to in Paragraph IY, will apply on interterritorial Army, Navy, and Marine Corps traffic, except that New England lines will not make nor participate in any allowances, but through fares to and from New England territory will be made, as specifically provided herein:

Block. 18 10 From.— Western tory. Terri-Central Passenger Association Territory. S outheastern Passenger Association Territory. New England Passenger Association Territory. New England Passenger Association Territory. New England Passenger Association Territory. Allowances. Through fares will be constructed on the basis of fares charged United States Government to * * * Vicksburg * * * (See Section V), plus fares charged United States Government therefrom (see Blocks land 10). * * * Through fares will be constructed on the basis of fares charged the United States Governmentto eastern gateways of trunk-line territory, plus local fares beyond, except where such combinations make higher than the lowest all-rail differential fares the latter fare will apply without any allowances whatever, * * * Through fares will be constructed on the basis of the fares charged the U. S. Government to eastern gateways of trunk-line territory, plus local fares therefrom. * * *

VII. Plaintiff made its bills for the transportation mentioned in Finding V on the theory that it was governed by Section Y, prohibiting the combination of two or more party fares or party fares and individual fares east or west of the gateways, but in settlement the Government contended that the rates to Springfield, Mass., in New England Passenger Association territory, were made by combination of fares charged the United States Government to eastern gateways *336of trunk line territory (which includes New York City) and the local fares from such gateways; and that the fares to Long Island points were made by combination of the fares charged the United States Government to New York, and the fares beyond New York. Settlement was made with the plaintiff for said transportation on these bases except that, with reference to the total of 1,359 men from Kelly Field to Mineóla, the Government, by mistake, underpaid the claimant by the sum of $1,262.19.

If the Government is correct in its contentions as to the construction of the fares on the transportation mentioned in’ the last two preceding findings, the differences between the amounts due and the amounts paid under said military arrangement is only the sum of $1,262.19. If plaintiff is correct in its contention as to the method of the construction of these fares, the differences would be the sum of $5,080.04. (Total of 1,857 men at $40.14 equals $74,539.98 minus total of $69,470.94 paid, equals $5,069.04. Add $11 on Springfield movement.)

DowNEt, *Judge,*

delivered the opinion of the court.

The action is to recover amounts deducted by the accounting officers from bills rendered by plaintiff for transportation furnished for the Army and Navy in 1916 and 1917, beginning in September of the first-named year. Minor discrepancies in some of the bills as first rendered have been adjusted, so that we find no controversy as to the amounts stated in the findings, the only defense presented going to the whole claim upon a single proposition.

For various reasons, which it was assumed would operate beneficially to both parties, several different military *“*agreements ” or *“*arrangements ” with reference to transportation rates were entered into between the carriers of the country, represented by their associations, and duly authorized officers of the Army, Navy, and Marine Corps. It is unnecessary to cite all of them, the one herein particularly in question being the so-called western military arrangement, dated April 1, 1916, and effective July 1, 1916. It and preceding agreements were in force at the time the transportation here *337involved was furnished, and it was followed by the inter-territorial military agreement effective January 1, 1917.

We do not deem it necessary to enter into a detailed discussion of the various provisions of the agreement in question even though the forced conclusion might be determinative of the case. The defense presented, reaching back to announced views and action of the accounting officers, reduces the question to narrow compass. The findings made' are an adoption of plaintiff’s requested findings not only because they are deemed to state correctly such of the facts as are necessary but because, so far as the facts are concerned, the defendant makes no objection to them. The sole objection of the defendant to plaintiff’s requested findings is, referring to Finding VI, that “ they do not state the fact that claimant company, together with others, who were parties to the interterritorial military agreement and other agreements referred to in the previous requests, entered into these agreements in bad faith and for the purpose of taking advantage of defendant,” and in the brief it is argued that the “ claimant was one of the parties to a fraud perpetrated upon defendant and ought not to be heard to come into this court and seek to benefit by its fraudulent action.”

The basis of the contention that the Government of the United States, represented in these matters by the proper officers of the Army and Navy and Marine Corps, but being otherwise without the protection of a competent guardian, was *“*overreached ” and defrauded, is found in the fact that while the agreement effective July 1, 1916, was being negotiated certain party rates were in effect which, after the negotiation of the agreement but before its effective date, were withdrawn.

Strangely the branches of the Government interested directly in the negotiation and operation of these agreements seem never to have learned that they were “ overreached ” or the victims of a fraud but have indicated their perfect willingness to continue to be victimized and defrauded although under no compulsion to do so. It remained apparently for the Auditor for the War Department and the *338comptroller nearly two years after the agreement in question went into effect to discover tbe absence of “ some of the elements of fair dealing,” but the comptroller, concluding his opinion affirming the action of the auditor in the case then under consideration (24 Comp. Dec. 663), said:

“ The agreement so far as known to this office has not been canceled by any Government authority, and this decision is not intended to conflict therewith, but to be a reasonable construction thereof as applied to the particular case now under consideration.”

And in the report herein by the Navy Department Division of the General Accounting Office, dated October *17, 1921,*it is said, referring to the method adopted in settling plaintiff’s accounts: “ If it is in violation of the strict terms of the arrangement, it is likewise a measure forced upon the Government by the questionable conduct of the carriers, and was resorted to in order to make possible an equitable adjustment of the situation,” and “ it (referring to the Government) had an unrestricted right to withdraw (article 18) but did not exercise that right, preferring to maintain the integrity of the arrangement in so far as it could be enforced with the party fare adjustment.”

Both statements indicate a desire to maintain the arrangement, due no doubt to advantages accruing thereunder to the Government, but a purpose to escape nonadvantageous results by construction. It is not contended that there was any provision requiring the maintenance of the party rates in question or prohibiting their withdrawal at any time, and we find no ground for concluding that the Government may avail itself of the contractual advantages and by the attempted construction escape the disadvantages. Upon the provisions of the agreement itself we deem the attempted construction and use of party rates unjustified.

But the defense herein does not attempt to justify a construction. It asserts an attempt to “ overreach ” the defendant and charges the perpetration of a fraud. It makes this serious charge in an attempt to avoid liability herein without any attempt to prove the charge except by hypotheses far from effective for the purpose and not altogether *339founded on the facts. And it does this with full knowledge of the fact, cited in the report herein, and sufficient of itself to determine the question, that the Government had an unrestricted right to withdraw from the agreement in question at any time. Some of the party fares in question were withdrawn before the agreement became effective, July 1, 1916, and the Government might have withdrawn from the agreement before it ever became effective at all. It not only might have done so, but if it regarded the action of the railroad companies in withdrawing these fares as a violation of the agreement it should have done so rather than to continue to accept the benefits and a considerable time later make serious, unverified charges in attempted avoidance of a condition deemed disadvantageous.

But in fact it does not appear that those branches of the Government service which, in the exercise of their proper powers, made these agreements ever claimed that the railroad companies had acted unfairly or otherwise than within their rights, and these branches of the public service not only continued to operate under them and to pay their bills as therein provided so long as permitted, but six months after the effective date of the one here particularly in question they entered into another containing substantially the same provisions. Nothing in the record shows any dissatisfaction on their part, either with the agreements or the action of the railroad companies thereunder, but their continuance to operate under them when so doing was at their option implies strongly to the contrary. Determinative of the question is the simple fact that they were in force when this service was rendered and not susceptible of the construction applied in making the deductions here involved.

We find the defense presented without merit or justification and have directed judgment for the plaintiff in the sum of $38,865.28.

Geaham, *Judge;*Hat, *Judge;*Booth, *Judge;*and Campbell, *Chief*Justice, concur.