Source: http://www.law.cornell.edu/supremecourt/text/287/144
Timestamp: 2014-03-07 13:37:47
Document Index: 481512189

Matched Legal Cases: ['§ 209', '§ 77', '§ 77', '§ 209', '§ 77', '§ 5', '§ 209', '§ 77', '§ 212', '§ 79']

UNITED STATES v. GREAT NORTHERN RY. CO. | LII / Legal Information Institute
Supreme Court aboutsearch liibulletin subscribe previews UNITED STATES v. GREAT NORTHERN RY. CO.
287 U.S. 144 (53 S.Ct. 28, 77 L.Ed. 223)
Argued: Oct. 11, 1932.
[HTML] The Attorney General and Mr. Thomas D. Thacher, Sol. Gen., of Washington, D.C., for the United States.
Argument of Counsel from page 145 intentionally omitted
The respondent was a railroad under federal control when control was relinquished by the government on March 1, 1920. By the Transportation Act of that year (
41 Stat. 464, § 209, 49 U.S.C., § 77 (49 USCA § 77)), it had the protection of guaranty as to its railway operating income for six months thereafter. The United States guaranteed that during this guaranty period the income should be not less than one-half of the annual compensation to which the carrier was entitled during the period of federal control. United States v. Guaranty Trust Co., 280 U.S. 478, 50 S.Ct. 212, 74 L.Ed. 556; Texas & Pacific Ry. Co. v. United States, 286 U.S. 285, 52 S.Ct. 528, 76 L.Ed. 1108; Continental Tie & Lumber Co. v. United States, 286 U.S. 290, 52 S.Ct. 529, 76 L.Ed. 1111. Upon the Interstate Commerce Commission was laid the duty of ascertaining the amounts necessary to make good this guaranty and of certifying to the Secretary of the Treasury the results of the inquiry. Something more was required for this purpose than the mere comparison of receipts and expenses during the period of control with receipts and expenses during the six months following. In the ascertainment of railway operating income, or any deficit therein, the amount to be included in operating expenses for maintenance of way and structures, or for maintenance of equipment, was to be fixed by the Commission, and was not dependent solely on the action of the carrier. For that purpose reference was to be had to the tests prescribed by the standard form of contract for federal control. Transportation Act 1920, § 209(f)(3), 49 USCA § 77(f)(3); Federal Control Contract, § 5(a). The Commission was to take as its base the average six months' maintenance expenses of the carrier during the years characterized as 'the test period,' i.e., the three years ending June 30, 1917. This amount was to be readjusted, however, so as to make allowance for changes in the extent of property maintained, for changes in the nature or intensity of the use, and, most important, for changes in the cost of labor and material. The end in view was the arrival at a figure that would permit the property to be kept up in the same state of reparation as at the time when the carrier's possession had been yielded to the government. The task of the Commission was not exhausted, however, when it ascertained the allowance to be made for the cost of maintenance. It was to require the restatement of other operating expenses in addition to those for maintenance 'to the extent necessary to correct and exclude any disproportionate or unreasonable charge to such expenses' for the guaranty period, or any charge 'which under a proper system of accounting is attributable to another period.' Transportation Act 1920, § 209(f), (5), 49 USCA § 77(f)(5).
A task so vast and intricate exacted time and study. Many of the carriers, however, including this respondent, were in urgent need of cash for pressing obligations. The statute contained provisions that were intended to relieve the pressure. By section 209(h), of the act (
41 Stat. 464, 466), the Commission was empowered, upon application during the guaranty period, to issue certificates for advance payments, such advances to be not in excess of the 'estimated amount' necessary to make good the guaranty. The Secretary of the Treasury was directed to make the advances in the amounts specified in the certificate upon the execution by the carrier of a contract, 'secured in such manner as the Secretary may determine,' that upon final determination of the amount of the guaranty it would repay the excess payment with interest, if excess there should be found to be. Under the authority of that section, certificates in the amount of $6,500,000 were issued by the Commission and collected by the carrier. The payments thus received were well within the limit of the guaranty as finally determined, and as to these no claim for reimbursement is put forward by the government.
The relief permissible under section 209(h) turned out to be inadequate. It was limited to applications made before the guaranty period had expired, to applications; that is to say, before September 1, 1920. In the case of the respondent, as in that of other carriers, the guaranty period expired with the Commission still unready to announce its ultimate award, and with the pressure of the need for intermediate relief as urgent as before. Accordingly, the Transportation Act 1920 was amended on February 26, 1921, by authorizing the Commission, if not at the time able finally to determine the whole amount due, to make its certificate for any amount definitely ascertained by it to be due, and thereafter in the same manner to make further certificates, until the whole amount due had been certified. Act of February 26, 1921, c. 72, 41 Stat. 1145, § 212, 49 U.S.C. 79 (49 USCA § 79). The text of the statute is quoted in the margin.
We may assume in favor of the petitioner that a certificate issued by the Commission under section 212 of the statute is open to impeachment for fraud or mistake, and that payments burdened with those infirmities are subject to be reclaimed. If this be assumed, it does not avail without more to lay a duty of restitution upon the carrier before us. Fraud in the making of the certificate is neither proved nor even intimated. Mistake also there was none, but merely a revision of judgment in respect of matters of opinion. The respondent reported that it had paid out for maintenance during the guaranty period $28,982,000. There is no claim that this report was false even to a penny. Readjustments were needed, however, as we have already pointed out, whereby allowance might be made for fluctuations in the cost of labor and material, as well as for other economic changes, between the period of test and the period of guaranty. The formulae for the readjustment of maintenance expenditures in use by the Commission on March 1, 1921, reduced the maintenance allowance to $27,233,000, which was more than one and a half million dollars less than the expenditures actually made. The formulae in use on June 8, 1926, reduced the allowance for maintenance to $23,815,000. In this last reduction lies the explanation of the discrepancy between the partial certificate and the final one. Neither set of formulae is an expression of mathematical truth in such a sense that accuracy may be affirmed of one and error of the other. Each makes it necessary to multiply the expenses of the test period by a factor derived from an imperfect and approximate estimate of a composite change of prices. To what extent the factor is an expression of mere opinion is perceived when the process back of it is considered. At the date of the partial certificate various items of expense during the years of the test periodthe cost of locomotives, of cars, of tracks, and many otherswere separately considered, and the proper percentages of increase during the period of the guaranty applied separately to each of them. At the date of the final certificate, the Commission determined to abandon these refinements. It joined together all the property of all the carriers in regional or territorial groups, and ascertained the factor of increase for the members of a group collectively. By the use of this method, the test period expense was to be 'multiplied by a factor representing the increase in the general level of cost of labor and material for the territories in which the lines of railroad of the carrier are situated.' A general equation factor was substituted for a series of factors separately computed and separately applied. The result, as the Commission concedes in its report, is at best an approximation representing an exercise of judgment as to the effect of a composite increase. What is thus conceded in the report as to the source of the discrepancy between the two certificates was confirmed upon the trial by the testimony of a witness for the government. The difference, he tells us, 'grew out of a difference of opinion as to the method of calculation rather than out of errors in the figures submitted.' The Commission has not said that in any particular case the general equation factor will yield results more accurate than those attained by the method theretofore in use. It has claimed no more for the new method than an enhancement of simplicity along with an approach to accuracy not inferior to that of the method displaced.