Source: http://www.chanrobles.com/usa/us_supremecourt/263/456/case.php
Timestamp: 2019-12-15 14:10:39
Document Index: 53042292

Matched Legal Cases: ['§ 15', '§ 418', '§ 418', '§ 418', '§ 15', '§ 15']

DAYTON-GOOSE CREEK RY. CO. V. ICC, 263 U. S. 456 (1924) - US SUPREME COURT DECISIONS ON-LINE
US Supreme Court Decisions On-Line> Volume 263 > DAYTON-GOOSE CREEK RY. CO. V. ICC, 263 U. S. 456 (1924)
DAYTON-GOOSE CREEK RY. CO. V. ICC, 263 U. S. 456 (1924)
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2. Section 422 of the Transportation Act 1920, by the new section, 15a, added by it to the Interstate Commerce Act, directs the Interstate Commerce Commission: to establish rates which will enable the carriers, as a whole, or by rate groups or territories fixed by the Commission, to receive a fair net operating return upon the property they hold in the aggregate for use in transportation (par. 2); to establish from time to time the percentage of the value of the aggregate property constituting a fair operating return, the act, however, fixing it for the years 1920 and 1921 at 5%, with discretion in the Commission to add one-half of 1% as a fund for adding betterments on capital account (par. 3), and to fix from time to time such aggregate property value. The said § 15a provides further that, because it is impossible to establish uniform rates on competitive traffic adequate to sustain all the carriers needed for the business without giving some an income in excess of a fair return, any carrier receiving such excess shall hold it as trustee for the United States (par. 5); that such excess shall be distributed, one-half to the carrier as a reserve fund, the other half to a general railroad revolving fund, to be maintained by the Commission (par. 6); that the carrier may use such reserve to pay dividends, interest on securities, or rent for leased roads to the extent that its net operating income for any year is less than 6% (par. 7), and whenever such reserve equals 5% of the value of its property, and while it so continues, the carrier's one-half of excess chanroblesvirtualawlibrary
(g) Under the statute, excess income is taken in trust, and the carrier never has such a title to it as to render its recapture by the government a taking without due process in violation of the Fifth Amendment. P. 263 U. S. 484. chanroblesvirtualawlibrary
287 F.7d 8, affirmed.
Appeal from a decree of the district court which dismissed a bill brought by the appellant Railway Company attacking the constitutionality of orders made by the Interstate Commerce Commission under the Transportation Act and praying that the United States, the Commission and a United States district attorney be enjoined from prosecuting civil or criminal actions to enforce the orders. chanroblesvirtualawlibrary
The Dayton-Goose Creek Railway is a corporation of Texas engaged in intrastate, interstate, and foreign commerce. Its volume of intrastate traffic exceeds that of its interstate and foreign traffic. In response to orders of the Interstate Commerce Commission, the carrier made returns for 10 months of 1920 and for the full year of 1921 reporting the value of its railroad property employed in commerce and its net revenue therefrom. It earned $21,666.24, more than 6 percent, on the value of its property in the 10 months of 1920, and $33,766.98 chanroblesvirtualawlibrary
While the Dayton-Goose Creek Railway Company was the sole complainant below and is the sole appellant here, 19 other railway companies have, as amici curiae, upon leave granted, filed briefs in support of its appeal. Their names appear in the margin. * chanroblesvirtualawlibrary
Paragraph 5 declares that, because it is impossible to establish uniform rates upon competitive traffic which will adequately sustain all the carriers needed to do the business without giving some of them a net income in excess of a fair return, any carrier receiving such excess shall hold it in the manner thereafter prescribed as trustee for the United States. Paragraph 6 distributes chanroblesvirtualawlibrary
This Court has recently had occasion to construe the Transportation Act. In Wisconsin R. Co. Commission v. C., B. & Q. R. Co., 257 U. S. 563, it was held that the act, in seeking to render the interstate commerce railway system adequate to the country's needs, had, by §§ 418 and 422, conferred on the Commission valid power and duty to raise the level of intrastate rates when it found that they were so low as to discriminate against interstate commerce and unduly to burden it. In the New England Divisions Case, 261 U. S. 184, it was held that, under § 418, the Commission, in making division of joint rates between groups of carriers, might in the public interest consult the financial needs of a weaker group in order to maintain it in effective operation as part of an adequate transportation system, and give it a greater share of such rates if the share of the other group was adequate to avoid a confiscatory result. chanroblesvirtualawlibrary
It was insisted in the two cases referred to, and it is insisted here, that the power to regulate interstate commerce is limited to the fixing of reasonable rates and the prevention of those which are discriminatory, and that, when these objects are attained, the power of regulation is exhausted. This is too narrow a view of the commerce clause. To regulate in the sense intended is to foster, protect, and control the commerce with appropriate regard to the welfare of those who are immediately concerned, as well as the public at large, and to promote its growth and insure its safety. 77 U. S. 564; County of Mobile v. Kimball, 102 U. S. 691, 102 U. S. 696-697; California v. Pacific Railroad Co., 127 U. S. 1, 127 U. S. 39; Wilson v. Shaw, 204 U. S. 24, 204 U. S. 33; Second Employers' Liability Cases, 223 U. S. 1, 223 U. S. 47; 153 U. S. 529. Mr. Justice Bradley, speaking for the court in California v. Pacific Railroad Company, 127 U. S. 39, said:
Title IV of the Transportation Act, embracing §§ 418 and 422, is carefully framed to achieve its expressly declared objects. Uniform rates enjoined for all shippers will tend to divide the business in proper proportion so that, when the burden is great, the railroad of each carrier will be used to its capacity. If the weaker roads were permitted to charge higher rates than their competitors, the business would seek the stronger roads with the lower rates, and congestion would follow. The directions given to the Commission in fixing uniform rates will tend to put them on a scale enabling a railroad of average efficiency among all the carriers of the section to earn the prescribed maximum return. Those who earn more must hold one-half of the excess primarily to preserve their sound economic condition and avoid wasteful expenditures and chanroblesvirtualawlibrary
It should be noted that, in reaching a conclusion upon this first proposition, we are only considering the general level of rates and their direct bearing upon the net return of the entire group. The statute does not require that the net return from all the rates shall affect the reasonableness of a particular rate or a class of rates. In such an inquiry, the Commission may have regard to the service done, its intrinsic cost, or a comparison of it with other rates, and need not consider the total net return at all. Paragraph 17 of § 15a makes this clear: chanroblesvirtualawlibrary
Second. The carrier owning and operating a railroad, however strong financially, however economical in its facilities or favorably situated as to traffic, is not entitled as of constitutional right to more than a fair net operating income upon the value of its properties which are being devoted to transportation. By investment in a business dedicated to the public service, the owner must recognize that, as compared with investment in private business, he cannot expect either high or speculative dividends, but that his obligation limits him to only fair or reasonable profit. If the company owned the only railroad engaged in transportation in a given section and was doing all the business, this would be clear. If it receives a fair return on its property, why should it make any difference that other and competing railroads in the same section are permitted to receive higher rates for a service which it costs them more to render and from which they receive no better net return? Classification of railways in the matter of adjustment of rates has been sustained in numerous cases. In the Minnesota Rate Cases, 230 U. S. 352, 230 U. S. 469, 230 U. S. 473, it was held that the rates imposed by the state upon two railways were not confiscatory, but that they were so in chanroblesvirtualawlibrary
The reduction of the net operating return provided by the recapture clause is, as near as may be, the same thing as if rates had all been reduced proportionately before collection. It is clearly unsound to say that the net operating profit accruing from a whole rate structure is not relevant evidence in determining whether the sum of the rates is fair. The investment is made on the faith of a profit, the profit accrues from the balance left after deducting expenses from the product of the rates, and the assumption is that the operation is economical and the expenditures are reasonably necessary. If the profit is fair, the sum of the rates is so. If the profit is excessive, the sum of the rates is so. One obvious way to make the sum of the rates reasonable, so far as the carrier is concerned, is to reduce its profit to what is fair. chanroblesvirtualawlibrary
It is then objected that the government has no right to retain one-half of the excess, since, if it does not belong to the carrier, it belongs to the shippers, and should be returned to them. If it were valid, it is an objection which the carrier cannot be heard to make. It would be soon enough to consider such a claim when made by the shipper. But it is not valid. The rates are reasonable from the standpoint of the shipper, as we have shown, though their net product furnishes more than a fair return for the carrier. The excess caused by the discrepancy between the standard of reasonableness for the shipper and that for the carrier due to the necessity of maintaining uniform rates to be charged the shippers, may properly be appropriated by the government for public uses because the appropriation takes away nothing which equitably belongs either to the shipper or to the carrier. Yet it is made up of payments for service to the public in transportation, and so it is properly to be devoted to creating a fund for helping the weaker roads more effectively to discharge their public duties. Indirectly and ultimately, this should benefit the shippers by bringing the weaker roads nearer in point of chanroblesvirtualawlibrary
It is further objected that no opportunity is given under § 15a for a judicial hearing as to whether the return fixed is a fair return. The steps prescribed in the act constitute a direct and indirect legislative fixing chanroblesvirtualawlibrary
It is also said in argument that the value of the carrier's property, upon which the net income was calculated, was too low, and was unfair to the carrier. The value of property, it is argued, really depends on the profit to be expected from its use, and should be calculated on the income from rates prevailing when the law was passed which chanroblesvirtualawlibrary