Evening star. [volume] (Washington, D.C.) 1854-1972, 1929-05-20
O'FALLON RAILROAD
UPSETS VALUATION
|. IN SUPREME COURT
Tribunal Accepts Cost OF Re-
production as Item in Fix
ing Property Value.
RAPID RISE IN RATES
SEEN BY GOVERNMENT
Interstate Commerce Commission
Must Scrap Figures of Years
Under Decision.


ment of the Supreme Courts deci-
sion in the ST. Louis and O'Fallon
case was heralded in Wall Street TO-
dav as sn extraordinarily 'bullish"
development OF profound Importance
in the financial history of Arneri-
can railroads Stocks Of dozens Of
roads were quickly BID up about 81
to SIS a share on the New YorE
Stock Exchange.
BY the Associated Press.
The ST. Louis 81 OFallon Railroad
succeeded in the Supreme Court to-
day IN upsetting the valuation. which
the Government had placed upon il
purposes.
In esding the controversy. the cour;
overturned valuations OF approximate.
81 900 900 900 less than claimed by thr
railroads. Under it the Interstate Com
merce Commission must scrap its valu
atiOns of years, conducted at great eE
pense to the Government and prepar
aew valuations giving consideration
reproduction values.
Justices Holmes. Brandes and Stor
dtsSented from the ma iority opinion.
Counsel Denied Raise Charge.
The opinion will, according to g.
Government. result in a rapid upVs
revision of rates although counsel I.
the railroads during argument OF T.
case emphatically denied that it necc
Sarily would result in higher tsrjf,
They assert that the railroads vol,
be controlled by what the trafic cou
bear.
Cost of reproduction at prevaiir
prices was accepted by the court as
element ln railroad valuation. It ststs
that such cost was an important iterH
TO be gwen consideration in determinin:
valuations.
Justice McReynoids, speaking for til.
majority said: In the exercise of II
proper function. this court has declare
sac law Of the land concerning vaius-
tiOns tor rate-making purposes.
nays Proper Heed Denied.
THE commission disregarded the sp-
proved rule ana has thereby failed ],
discharge the definite duties impose.
by Congress.
Unfortunately. proper heed was de-
MED the timely admonition of tbs
minority tOf the commission: The
function of this commission is not To
act rs an arbiter in economics. but as
an agency of Congress. to apply the Ia
of the land TO facts developed of rec-
ord Ia matters committed by Congress
~ our jurisdiction.
Bra ndeis SuStains Lower Court.
Justice Brandeis. in long statement
sustained the decision of the lower rourc
IN approving the action of the COM
mission. Justice McReynolds made :
snort statement saying the lower collrt
was right n holding the OFallon and
the Manufacturers Railway Co. were
two separate systems. Justice Butler
took no part in the consideration of the
case
When Justice McReynolds ended his
statement, there was a rush in the
courtroom for the one public exit. which
Chief Justice TAFT halted with sharp
adnlcnltlOn, ordering the marshal ~
lock the door If necessary to presel've
order
Justice Stone i'll dissenting said he
did not see how the commission cou't
dU more than II had done. asserting II
had given reproduction costs considera-
zion AS we'll as all other elements Of
value brought to the attention of the
cnmmfiSsiUn
Methods used by the Interstate Com
nerce Commission III valuing railroads
Iur rats-making and other regulator,
purposes repeatedly attacked, mad not
been passed upon by the Suprenns
Court when the OFallon appeal vas
MED. although several efforts had been
made To obtain ruling from the high
est tribunal
Contends Formula Used.
The st. Louis & OFallon Railroad
contended the commission mad used q
formula III valuin2 its property. and
had failed 10 give proper consideration
TO cost Uf reproduction at current
prices and other elements. II CHALLENGED
the commissions valuation when it was
useG A. the basis for an order requir-
Ing II to pay to the Government a part
Of It's net earnings received during 1C
months III 1920 and during the calen-
usr years 1927. 1922 and 1923.
The commission had acted under 2
law which provided that beginning IL
1929 railroads were entitled to retain
net earnings amounting TO per cert
On their value. but must divide equally
with the Government all earnings in
excess of that amount the money paid
over TO thr Government 10 be used in
aiding weaker railroads. which hao
failed to earn per cent on their value.
and the excess earnings retained bv the
railroad 10 be placed by II in a better
ment fund
Richbere Approves Methods.
In deciding The OFallon case the FsS-
arsl Court AZ ST. Louis did not oass On
the validity of ths commissions vaiu-
alton. because it found that the earn
ingS which the railroad had nesn
permitted to retain exceeded per cert
on the valuation the railroad claimed.
When the case reached the Supreme
Court Donald r. Richberg general
counsel for the National Conference on
Valuation OF American Railroads. was
permitted, at the request OF the Senate.
10 fle brief and participate in the
oral argument. lie approved the valu-
alton methods vi the commission.
Guards Stop Money Shipment.
LONDON. May 20 G4o).-The Mail to-
daV prints a BASra dispatch saving No.