Evening star. [volume] (Washington, D.C.) 1854-1972, 1927-12-11
ROADS LOSE POINT
IN VALUATION FIGHT
Billions May Be Involved in
Decision for Basis OF
Original Cost.
by the Associated Press

by the Associated Press
ST. LOUIS. Mo. December 10
The railroads contention for valuation
on basis OF cost of reproduction new
was given blow today when a special
court OF three Federal Judges upheld
The valuations OF the st. Louis x
. FallOn Railroad as fixed by the In
terstate Commerce Commission large
ly on the basis or original cost
This was test case involving a
difference ~ more than $4,000, goo. 900
in the valuation of the Nations rail
roads. The opinion was written ny Or
cult Judge kimbrough stone ana con
Cured i'm hv Circuit Judge Arha >.
Van Vlakenburgh and District Judge
{ Is Faris.
The case has been called THE big
rest lawsuit in history because OF
its accentance by both the Interstate
Commerce Commission and the ram
roads as n test of the principles ana
methods to he employed in valuation
of all the railroads of the country
both for The purpose of rate making
and for the recapture by the Federal
Government of one-half of excess earn
nSs above SlN per cent
Varying Estimates.
The railroads contended the valua-
ton of the O'Fallon road was Sl,39o,-
coo. The commission declared the
valuation varied from 5000 10 500
600 during the three years for when
il sought TO recapture excess earnings
totaiing $225.000.
Judge Stone held that neither the
question of value nor the methods
for ascertaining value need be passed
on, because, even accepting the ran
roads claim OF value. its earnings for
the years in question ranged from
6.97 per cent to S.7l per cent ana
hence no eonfiscation of property
could be claimed by the road.
Therefore, he held the commissions
order is mot open to attack upon the
ground OF wrongful valuation
Judge Farris. in his concurring opin'
ion went into valuation methods
exhsustiveIy. concluding thar The
commission reached the valuation
found by il i'm the only way possible,
in situation so difficult that absolute
certainty and correctness is well nigh
finitely impossible.
Courts Argument.
Rejecting the railroads contention
that the dominant element of value
was reproduction new. Judge Farris
said:
"A valuation arrived at by the sole
use of either the prudent investment
theory bottomed upon cost when con-
structed. or upon the theory of the
present cost of reproduction new less
depreciation. would work presently TO
the public and eventually carriers
themselves such monstrous inequity.
as to preclude wholly the use of either
such methods exclusively and elm.
mate the notions that Congress CON
templa ted the exclusive use of either
IF such methods"
Therefore. he continued. "the
value of the proposal properties of
a common carrier under the recapture
provisions of ihe Interstate COM
merce Act ought to he the net re-
eIlt of expert opinion reasonably and
hcne~tly exercised.
nudge Van Calkenburch concurred
in the decision without comment.
Daniel s. Kirby of counsel for the
st. Louis and O'Fallen said he be-
lieved judge Faris' opinion provided
the ground for an appeal to the
limited States Supreme Court and
said the road would so appeal on.
December 10. when the degree Is
formally entered.