Source: https://supreme.justia.com/cases/federal/us/250/607/
Timestamp: 2019-04-22 18:35:12+00:00

Document:
Justia › US Law › US Case Law › US Supreme Court › Volume 250 › Groesbeck v. Duluth, S.S. & A. Ry. Co.
(1) In the absence of any suggestion of illegality or mismanagement in acquisition or operation, all parts of the railroad's system within the state, profitable or unprofitable, should be embraced in the computation. P. 250 U. S. 611.
though unremunerative, extension of service because furnished by acquiring traffic rights from another company. P. 250 U. S. 613.
(3) Sleeping car, parlor car, and dining car services should not he treated as separate operations, but the passenger service, including these facilities, must be treated as a whole. Id.
(4) In the present state of railroad accounting, what formula should be adopted for dividing charges and expenses common to freight and passenger services and not capable of direct allocation is a question of fact, rather than of law, and the Court cannot say that the trial court erred in adopting the method pursued in this case. P. 250 U. S. 614.
Michigan to enjoin the enforcement of the act. The bill alleged that the reduced rate would deprive plaintiff of its property without due process of law in violation of the Fourteenth Amendment. The Attorney General and the railroad commissioners of the state, being charged by the law with its enforcement, were made defendants. They denied that the rate was confiscatory, and on this issue the district court found for the railway. A final decree granting the relief sought was filed February 14, 1918, and an appeal to this Court was promptly applied for by the defendants and allowed. Meanwhile, on January 1, 1918, the federal government had taken over the operation of this and other railroads, and is still operating the same. The two-cent rate was never put into effect on this railroad, as a restraining order issued upon the filing of the bill was continued until entry of the final decree. In 1919, the statute attacked here was repealed (Michigan Public Laws No. 382). But the case has not become moot for the following reason: on continuing the restraining order, the railway was required to issue to all intrastate passengers receipts by which it agreed to refund, if the act should be held valid, the amount paid in excess of a two-cent fare. Later the railway was required to deposit, subject to the order of the court, such amounts thereafter collected. The fund now on deposit exceeds $800,000, and the refund coupons are still outstanding. In order to determine the rights of coupon holders and to dispose of this fund, it is necessary to decide whether the Act of 1911 was, as respects this railroad, confiscatory.
master related largely to the results of the operation of the railroad for the four years ending June 30, 1913. When the case came on for hearing before the district judge in 1917, supplemental evidence was taken in open court covering the operations of the four additional years ending June 30, 1917. The evidence disclosed the usual diversity of opinion as to the value of the property and as to the proper method of dividing between the passenger and freight services the common expenses and the charges for property used in common. Upon the whole evidence, the court found that the two-cent fare would have resulted in a return on intrastate passenger business of less than 2 percent during the six years ending June 30, 1917.
should have been excluded, and partly to his having adopted improper formulas for the division of common charges and expenses as between the freight and the passenger services, and that, if these specific errors are corrected, it will appear that the two-cent fare would have been highly remunerative. These alleged errors must be considered separately.
be owned, leased, controlled or occupied by such company . . . shall be included in the computation [i.e., determining whether the year's gross passenger earnings equal $1,200 per mile], and the rate of fare shall be the same on all lines owned, leased, controlled or occupied by such company."
In other words, the legislature has declared that, for the purpose of determining the right of an intrastate passenger to travel on any part of the company's lines at the rate of two cents a mile, all of the lines within the state must be treated as one; that those on which travel is light must be averaged with those on which it is dense, and obviously also that those parts of the system which are unprofitable must be taken with those which are profitable. Every part of the railroad system over which the passenger is entitled by the act to ride for a two-cent fare must be included in the computation undertaken to determine whether the prescribed rate is confiscatory. This is true at least in the absence of illegality or mismanagement in the acquisition or operation of the division in question, and of such there is not even a suggestion in the record. There is nothing in San Diego Land & Town Co. v. National City, 174 U. S. 739, 174 U. S. 758, or in San Diego Land & Town Co. v. Jasper, 189 U. S. 439, 189 U. S. 446, upon which the state officials rely, which is inconsistent with this conclusion.
Ishpeming over the main line. What has been said above in regard to the Western Division applies equally to the South Line.
Third. It is contended also that a loss was incurred in operating through passenger trains from Houghton over the Mineral Range Railroad to Calumet, and that such loss should be excluded from this calculation. This extension of plaintiff's service was clearly reasonable in view of the importance of Calumet, which lies only fourteen miles from its own lines. It was admitted by the state officials that passengers on the route were, under the act, entitled to travel at the two-cent rate. The fact that the service was furnished by acquiring traffic rights, instead of by building an independent line, clearly affords no reason for excluding the results of the operation from the calculation.
services or to increase the charges to cover the cost of the particular service on its line. It is inconceivable that the Legislature of Michigan should have intended in enacting the two-cent fare law to deny to its citizens these customary facilities, and, for the purpose of determining whether the act is confiscatory, the passenger service including these facilities must be treated as a whole. The fact alleged that these facilities are used mainly by interstate travelers is immaterial.
Interstate Commerce Commission v. Union Pacific Ry. Co., 222 U. S. 541; The Minnesota Rate Cases, 230 U. S. 352; The Missouri Rate Cases, 230 U. S. 474; Chesapeake & Ohio Ry. Co. v. Conley, 230 U. S. 513; Oregon R. Co. & Nav. Co. v. Campbell, 230 U. S. 525; Southern Pacific Co. v. Campbell, 230 U. S. 537; Allen v. St. Louis, I. M. & S. Ry. Co., 230 U. S. 553; Missouri Pacific Ry. Co. v. Tucker, 230 U. S. 340; Wood v. Vandalia R. Co., 231 U. S. 1; Louisville & Nashville R. Co. v. Garrett, 231 U. S. 298; In re Engelhard, 231 U. S. 646; San Joaquin, etc., Irrigation Co. v. Stanislaus County, 233 U. S. 454; Northern Pacific Ry. Co. v. North Dakota, 236 U. S. 585; Norfolk & Western Ry. Co. v. West Virginia, 236 U. S. 605; Missouri v. Chicago, B. & Q. R. Co., 241 U. S. 533; Rowland v. St. Louis & San Francisco R. Co., 244 U. S. 106; Darnell v. Edwards, 244 U. S. 564; Denver v. Denver Union Water Co., 246 U. S. 178.
The Interstate Commerce Commission, upon its organization July 1, 1887, required the railroads to report operating expenses separately as between the freight and passenger services. The difficulties were so great and the results so widely discredited that the requirement was withdrawn as of June 30, 1894. The requirement was restored as of July 1, 1915. In the Matter of Separating of Operating Expenses, 30 I.C.C. 676. In the interval, railroad accounting had in this respect made gradual advances. J. M. Talbott, Transportation by Rail (1904); Buell v. Chicago, Milwaukee & St. Paul Railway Co., 1 Wis.R.Com. 324 (1907); The Minnesota Rate Cases, 230 U. S. 352, 230 U. S. 458-461 (1912); 14 American Railway Engineering Association Proceedings, pp. 587, 1128-1135 (1913); Western Passenger Fares, 37 I.C.C. 1, 12-30 (1915). See M. O. Lorenz, Railroad Rate Making, 30 Quarterly Journal of Economics, pp. 221-232 (1916); W. J. Cunningham, The Separation of Railroad Operating Expenses between Freight and Passenger Services, 31 Quarterly Journal of Economics, pp. 200-249 (1917).
"The representatives of the state commissions advocated the use of 'gross ton miles' as a basis, while the representatives of the railways favored 'engine ton miles.' The discussion seemed to be somewhat influenced by the possible effect of these respective bases on statistical evidence which might be introduced in passenger rate cases. It may fairly be said that the facts and arguments presented do not warrant the final approval by the Commission of either the gross ton mile or the locomotive ton mile at this time."
Rules Governing the Separation of Operating Expenses Between Freight Service and Passenger Service on Large Steam Railways, Effective July 1, 1915, p. 3. These rules are now in process of revision.

References: v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v. 
 v.