Source: http://www.chanrobles.com/usa/us_supremecourt/287/134/case.php
Timestamp: 2017-12-16 13:02:52
Document Index: 620239734

Matched Legal Cases: ['§ 20', '§ 20', '§ 20', '§ 15', '§ 19', '§ 20', '§ 20']

The Interstate Commerce Commission issued an order pursuant to § 20 [Footnote 1] of the Interstate Commerce Act, as amended, requiring the Norfolk & Western Railway Company to carry certain coal mining properties in its accounts as not used in the service of transportation. The railway filed a petition in the District Court to enjoin the enforcement of the order, and, from a decree of dismissal by a District Court of three judges, this appeal was taken.
During the period between 1917 and 1920, the railway experienced difficulty in obtaining an adequate supply of coal of satisfactory quality for use in its locomotives. In an effort to meet this situation and to reduce costs of operation, three coal mines, adjacent to the right of way, were acquired, the terms of purchase being that they should be used solely for the supply of locomotive fuel. The investment was, as of September 30, 1928, after debits chanroblesvirtualawlibrary
First. The Commission's order is challenged as in excess of the statutory grant of power. The concession is made that § 20 of the Act grants a discretion to prescribe a uniform system of accounts, the manner in which they shall be kept, and the forms thereof. The appellant, chanroblesvirtualawlibrary
however, asserts that this discretion is limited by the purposes and ends for which such Accounts are to be kept, as exhibited in other sections of the Act. Reference is made to the valuation § (19a), [Footnote 2] which calls upon the Commission to report "the value of all the property owned or used by every common carrier," and specifies in subparagraph (b) that, as part of the investigation, the Commission shall
Stress in laid upon the fact that final valuations made by the Commission are to be prima facie evidence of the value of the property in all administrative and judicial proceedings under the Act. So also, the appellant seeks support for this contention in the fair return and recapture section (15a), [Footnote 3] which assures to the carrier "a fair return upon the aggregate value of the railway property of such carriers held for and used in the service of transportation," and for recapture of income in excess of a return of six percentum upon the value of such railway property. The phrases employed in these sections, "in the service of transportation," and "for its purposes as a common carrier," are said to mark the limits of the statutory power of the Commission in classifying capital assets for accounting purposes.
In view of the uncontradicted fact that the mines in question were purchased for and dedicated to the use of fuel supply, and may not be used for any other purpose, the appellant deems it necessarily to follow that these assets were acquired for carrier purposes, and are used in the service of transportation, and serve no other purpose or use whatsoever. The conclusion sought to be drawn is that, although the Commission may exercise a reasonable discretion in prescribing the nature and form chanroblesvirtualawlibrary
We must examine the origin, the purpose, the reenactment of the statutory provision, and the practice of the Commission thereunder, to resolve the question thus presented. The authority to require annual reports from carriers and to prescribe a uniform system of accounts was conferred on the Commission by the Interstate Commerce Act of 1887, [Footnote 4] and was but slightly elaborated in statement by the Hepburn Act and the Transportation Act, 1920. [Footnote 5] One of the prime purposes of § 20 is, and has been since the adoption of the Act of 1887, that the carriers' accounts should be uniform, so as to afford the Commission and the public a basis for comparison of their respective operations. In orders issued pursuant to this legislation, the Commission, as early as 1914, drew a distinction, for purposes of accounting, between transportation and nontransportation property. The rule as to classification which appellant attacks had been in force long prior to the passage of the Transportation Act, which added to the law theretofore in effect § 15a, respecting recapture, and prior to the enactment of the Act of March 1, 1913, [Footnote 6] which added § 19a, concerning valuation, to which appellant turns for the limitations it would have us read into § 20. Moreover, those sections draw the very distinction which the Commission order has long enforced. Section 15a, in referring to the fair return guaranteed the carrier, speaks not of the property as a whole, but of "the chanroblesvirtualawlibrary
Plainly, the Commission, under the authority conferred upon it by Congress, must draw a line between the two sorts of property owned by the railroads. Within broad limits, that body's determination is necessarily beyond revision and correction by the courts. The record shows that it is unusual for a railroad to own mines for the production of locomotive fuel; in fact, we are referred to no other similar instance. Whether the Commission should make special classifications to fit exceptional cases lies within the discretion conferred, and courts ought not to be called upon to interfere with or correct alleged errors with respect to accounting practice. If we were in disagreement with the Commission as to the wisdom and propriety of the order, we are without power to usurp its discretion and substitute our own. Kansas City So. Ry. Co. v. United States, 231 U. S. 423, 231 U. S. 444-456.
Second. With great earnestness, the appellant characterizes the order as in several aspects a denial of due process. It declares that, by virtue of the Commission's mandate, an unfair and improper rate base is fixed, and a capital asset properly to be taken into account for purposes of recapture is eliminated. But this is to ignore the fact that the order is one touching accounting merely; that, before any rate base can be ascertained or any basis of recapture determined, the carrier will be entitled to a full hearing as to what property shall be included, and not until the Commission excludes the assets in question from the calculation may the carrier assert the infliction of injury to its rights of property. A recapture proceeding is now pending against the appellant wherein full opportunity will be afforded to present any claims with chanroblesvirtualawlibrary
We are not convinced by the assertion that the necessary effect of classifying the mines as noncarrier properties is to exclude them from consideration as capital in the issuance of securities. We are not, however, required now to decide this question, for the mere accounting classification can conclude neither the Commission nor the appellant upon the hearing of an application under § 20a(2). [Footnote 7]
Appellant also characterizes the Commission's action as a denial of the legal right of the railway to adopt fair and reasonable methods of accounting. We have shown that the order made does not affect the right to a fair return, or to determination of the full and fair value of the carrier's entire property and assets, and does not amount to a taking thereof. The objection now under chanroblesvirtualawlibrary
Third. Finally, complaint is made of that portion of the Commission's order which requires the charges to Account 716, "Material and Supplies," for coal produced from the collieries for consumption in the appellant's transportation operations, to be upon the basis of the average monthly cost for producing the coal. The objection seems to be grounded on the premise that actual cost of production is not the proper item to go into that account. The Commission, however, expressed a willingness to reopen the case and to give further consideration, chanroblesvirtualawlibrary