Evening star. [volume] (Washington, D.C.) 1854-1972, 1930-02-16
What Is Gust Compensation" !

The decision of the United States
railway fare case has become symbolic
of two distinct points of view on the
rights Of property, and the fight in
the Senate over the confirmation of
Mr.. Hughes was more of fiare-up over
the principles embodied in that decision
than an attack on the fitness or quail
iAcations of the new Chief Justice.
The parts of the courts decision most
vigorously condemned during the SEN
ate debate we're the findings that a
return Of $40 per cent to the railway
was Clearly inadequate; that "in the
light Of recent decisions of this court
it Is not certain that rates securing a
return of ia or even per cent on
the value of the property would not
Be necessary to avoid conflscAtion," and
that certain franchises enjoyed by the
railway corporation as grants from the
people were included in computing the
rate base.
1t is impractical here to set down
fully the courts reasoning in reaching
these conclusions, beyond mentioning
the points that lust compensation"
does not mean merely current interest
on investment. but must include such
factors as the condition of the money
market, maintenance of credit, conf
dence of investors and a profit that in
addition to paying expenses permits
accrual Of . suitable depreciation fund,
payment of interest, reasonable divi-
bends" and something left over for sur
plus. As far as the inclusion in the
rate base f"the franchises is concerned,
the court mentioned previous Mary
land decision holding that these ease
rnents constituted an interest in real
estate and should be included, but held
that objections to that principle were
made too late by counsel for the people
and therefore could not be considered
even II the objections ever possessed
. substance
Justice Brandeis' able dissent was
baAed on the usual premise in such
eases that questionable methods were
used in computing the rate base, and
that II rules he deemed applicable
were followed the return would have
: been higher. and that,a met return Of
e.26 per cent upon the present value
Of the property Of street railway en-
joyinS q monopoly in one Of the Oldest,
: largest and richest cities of the Atlantic
Seaboard would seem to be compensa-
tory" He held that the franchises
were included in the rate bases in error
Of Federal Law and As the question was
one involving violation of the Consti-
tuition the Supreme Court should have
considered them. He argued, more
over, that the lower court was not
clear as to the nature or function Of
the depreciation charge and II the rail-
way consistently followed the Court of
Appeals method of fixing these charges
recasting Of the company's accounts
Tor the five years previous to adoption
OF that method would show that it
earned no profits, misrepresented its
financial condition and paid dividends
illegally.
This present inadequate summary of
the pros ana cons of the case is cited
: IN connection with Senator Borahs
statement of fact that 1.-The decision
illustrates the wide division of views
with reference to one Of the most i'm
portant questions from legal and
economic standpoint confronting the
people Of the United States today"
But how is 1t going to be answered.
Certainly there were no very profound
suggestions or remedies offered during
the Senate debate, beyond the inference
OF the minority that conditions might
be improved by inaugurating a process
OF manipulating the judges according
to their economic philosophy.
An opportunity for sound and i'm
mediate approach to this question, how
ever, is presented to the Senate through
Its forthcoming consideration of the
Capper bill, designed, the author says, to
give washington real Public Utili-
ties Commission and not set of rub
Der stamps" and to put teeth In its
decbionb"-in other words, to limit the
powers Of the courts in review of ap-
peAls from the orders of the commits
sion. This measure attempts to pro-
hibit the courts from passing on ques-
tons Of fact, as differentiated from uues-
lions Of law, and restricts appeals from
orders Of the commission to those in
volving the constitutional questions of
contract and lack Of due process or
confiscstion. The courts could not
write new rates to supersede those
drafted by the Public Utilities Commits
sion nor enter their own theories of
valuation in preference to the commits
sion's theory. But If they found that
evidence was lacking to support the
commissions orders, or that orders
were invalid under the Constitution,
the commission would be ordered to re-
wise them.
n considering this legislation the
Senate might try its hand at drafting
. legislative definition Of lust compen-
cation" for street railway doing busi-
ness in Washington. For without 1t
the courts will be left where they now
are-holding the bag.
The railway companies now contend,
Tor instance, that not only are current
returns Of "a and a. per cent confis-
catory, but that anticipated returns
Of per cent under q ten-cent
fare lie also confscatory. In the Bal
.timore case e.26 per cent was con-
.sidered. with admissions that g. per