Source: http://www.chanrobles.com/usa/us_supremecourt/287/178/case.php
Timestamp: 2017-10-17 04:11:10
Document Index: 350278851

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

The carrier operates lines of railroad in Massachusetts, Rhode Island, Connecticut, and New York. Its tracks enter the State of New York at or near Portchester, and, at Woodlawn, connect with the tracks of the New York & Harlem Railroad Company, now operated under lease by the New York Central System. From Woodlawn south to the Grand Central Station, a distance of about twelve miles, the carrier's passenger trains run over the Harlem tracks, and the carrier and the Central use the station in common. At Boston, Massachusetts, the carrier's tracks connect with those of the Boston Terminal Company, the owner of the South Station in Boston, and chanroblesvirtualawlibrary
From a statement of the facts as to the carrier's interest in the tracks south of Woodlawn, we pass to a consideration of its interest in the Grand Central Terminal. An agreement described as a "tripartite lease" was entered into on November 1, 1872, between the Harlem, the Central, and the New Haven whereby the Harlem leased to the other roads the use of certain parts of the Grand Central Depot (a building since then destroyed) and the adjacent yards. On July 24, 1907, this agreement was superseded by another tripartite lease between the same parties. The Central agreed at its sole expense to acquire the lands and make all the changes necessary for the construction of a new station, the present Grand Central Terminal. Acting for itself and the Harlem, it leased to the New Haven during the term of the New Haven's Charter (i.e., in perpetuity) the
with the proviso that the New Haven's right to the use of the terminal should in no event exceed 50 percent of the maximum capacity. As "compensation for the premises hereby demised," the New Haven was to pay to the Central that proportion of 4 1/4 percent interest on the cost of construction and of the annual expenses for chanroblesvirtualawlibrary
With this statement of the facts as to the carrier's interests in the tracks and terminals, we reach the question whether the Commission was under a clear duty, enforceable chanroblesvirtualawlibrary
By § 19a of the Interstate Commerce Act (49 U.S.Code, § 19a, Act March 1, 1913, c. 92, 37 Stat. 401, as amended), there is laid upon the Commission the colossal task of preparing an inventory and valuation of the property of the railroads of the United States. [Footnote 1]
For convenience of reference. this part of the directions that are grouped under the heading "first" will be described as number one. chanroblesvirtualawlibrary
The Commission, at an early stage in its labors, was confronted with the problem as to the proper method of valuation where there was a division of interest between the ownership and the use. The first exposition of its views upon that subject will be found in a decision made July 31, 1918, in the matter of the valuation of the Texas Midland Railroad, 75 I.C.C. 1, 20, 121, 122. The substance of its ruling there was that, where property is jointly used by two owners, the details will appear in the inventory of each; that, where property is owned by one carrier, and exclusively used by another, the details will appear in the inventory of the owner, but in addition chanroblesvirtualawlibrary
The Commission has steadfastly adhered to these principles in the fulfillment of its task. Along the lines there charted, a thousand inventories and reports have been made, it is said, during the nineteen years that have gone by since the Valuation Act was passed. Cf. Report of the I.C.C. for 1931, p. 68. In only one instance, except this, has the method, so far as we are informed, been challenged in the courts as a departure from the statute, and there mandamus was refused. Kansas City Southern Ry. Co. v. Interstate Commerce Commission,6 F.2d 692. Cf. Matter of Kansas City Southern Ry. Co., 75 I.C.C. 223, 234. What was done in this inventory has at least that sanction of validity which is born of long administrative practice. United States v. Moore, 95 U. S. 760, 95 U. S. 763; Logan v. Davis, 233 U. S. 613, 233 U. S. 627; Brewster v. Gage, 280 U. S. 327, 280 U. S. 336; Fawcus Machine Co. v. United States, 282 U. S. 375, 282 U. S. 378. In conformity with that practice, the Commission overruled the protest of the chanroblesvirtualawlibrary
Cf. Des Moines Gas Co. v. Des Moines, 238 U. S. 153, 238 U. S. 165; McCardle v. Indianapolis Water Co., 272 U. S. 400, 272 U. S. 414. These are the words of the Commission in answering the carrier's objection that the going concern value had not been separately stated. Its answer might have been the same if it had been meeting the objection that privileges of user, incapable of appraisal in terms of the cost of the thing used, had been described in the inventory without specific appraisal of the value of the use.
We are thus remitted to the question whether this method of classification, accredited to us, as it is, with all the authority springing from administrative practice, is a departure from any duty created by the statute, or, more accurately, from any duty so peremptory and unmistakable as to be enforceable by mandamus. True indeed it chanroblesvirtualawlibrary
We must distinguish between the ultimate result to be attained by the preparation of the inventory and the details of form and method prescribed for its attainment. To admit that there must be a valuation of the whole is not equivalent to admitting that a separate and specific valuation must be allocated to every kind of property interest embraced within the whole. To what extent a group of interests shall be resolved into its elements is thus a question of degree. If a barren literalism were to guide us, subdivision could be carried down to the dimensions of an atom. We are not to push the mandate to "a drily logical extreme." Noble State Bank v. Haskell, 219 U. S. 104, 219 U. S. 110. A roadbed and a terminal are property, but so are license privileges, and contracts for supplies, and rights in personam as well as those attaching to a res. Was it the meaning of the lawmakers that rights and interests such as these were to have a value specifically assigned to them apart from their relation to the "going value" of the business? Not even counsel for the carrier would have us go so far. By concession, there are forms of property which are to be considered by the Commission as contributions to a larger whole, and not as things apart. We were told upon the argument that the interests in the Harlem tracks might have been omitted from the inventory chanroblesvirtualawlibrary
We shall practice a like restraint, observing only in passing that the proper classification is obscure (Union Pacific Ry. Co. v. Chicago, Rock Island & Pacific Ru. Co., 163 U. S. 564, 163 U. S. 582, 583; Union Pacific Ry. Co. v. Mason City Railroad Co., 222 U. S. 237, 222 U. S. 247-248), and that the carrier, by its own conduct, has admitted the obscurity. In its annual reports to the Commission, starting in 1888 and including the year preceding the beginning of this suit, its interests in the Harlem tracks and in the New York and Boston terminals are reported under "class 5," which is described in the report as including
What concerns us at the moment, however, is not the fitness or the unfitness of one classification or another. What matters for present purposes is the carrier's concession that the command to prepare an inventory in which all the property shall be valued does not mean that every property interest shall be separately valued. Something, then, is to be abated from the dictates of an implacable literalism allowing no exceptions. chanroblesvirtualawlibrary
In our summary of the statute, the provisions under the heading "first" of subdivision b were separated into two parts, described as numbers one and two. Part number one was intended to procure the valuation of a railroad considered as a physical thing. Every "piece of property" is to be inventoried, and, with reference to every "piece" so inventoried, the Commission is to ascertain the investment in the thing, and the cost of producing it anew. The factors have been made familiar by historic litigations. Smyth v. Ames, 169 U. S. 466; St. Louis & O'Fallon Railway Co. v. United States, 279 U. S. 461. But the statute does not mean that there shall be a duty to appraise in terms of cost if the interest to be appraised is such that the cost of the thing is without relevance as a criterion of the value of the interest. There can be no plain and certain duty, enforceable by mandamus, to proceed to a valuation that will be a snare or a deception. Here, the New Haven has not invested anything in the roadbed or the terminals. It is not affected for good or ill by fluctuations in the cost of building them anew. Whatever the legal category in which its interests are to be placed, the value is independent of the cost of the thing in which those interests inhere. Plainly untenable is its contention that the amount to be allowed to it is the proportion of the cost value of the property that would result from a division of such value between itself and the Central in the ratio of use. Matter of New York, New Haven & Hartford R. Co., 30 I.C.C.Val.Rep. 1 at 31, 33. Such a method of appraisal ignores the millions of dollars payable year by year in perpetuity to keep chanroblesvirtualawlibrary
The argument will be made, however, that the Commission is inconsistent. Appraisal on the basis of cost has been thought to be suitable where the lessee has a possession exclusive of the owner. Why, then, is it not suitable also where the interest of the lessee is in common with the owner, and this though the interest fluctuates from chanroblesvirtualawlibrary
day to day with the measure of the use? No doubt the practice of the Commission has been what the argument assumes. The practice has been, as we have already pointed out, when the possession of a lessee is exclusive of the possession of the owner, to inventory leased property in the name of each of them, setting down for each the original and the reproduction cost of the subject matter of the lease, setting down the fact of use, and making allowance thereafter for any increase or deduction due by reason of such use when costs are readjusted and corrected to express the final values. [Footnote 2] Never upon the face of the inventory has there been a specific valuation of the interest of the lessor and that of the lessee considered as estates in the land and structures, and apart from the valuation of the property demised. The Commission has been unfaltering in its adherence to the principle that the value to be reported is the value of the thing, and not of every interest connected with the thing. Whenever the nature of a lease is such that the cost of what is leased may appropriately be taken as an index of the value of the leasehold, the inventory and the valuation have been made upon that basis. Whenever the interest has been such that cost is not an index, the test of cost has been rejected. In the application of these methods, there has been no discrimination between this carrier and others. In the inventory now in controversy, there are properties owned by the New Haven, and wholly leased to other lines, and properties owned by other lines, and wholly leased to the New Haven. For all these properties, the reproduction cost is set forth in the inventory of the New Haven System without specific appraisal of the value of the reversion as an interest subject to the lease, or the value of the lease as an interest distinct from the reversion. chanroblesvirtualawlibrary
We recur, then, to the question why the method of appraisal that has been thought to be appropriate where a lessee has the sole use may not be followed here also where, in common with the owner, the lessee has an undivided interest in the use of tracks and terminals in return for yearly payments. Perhaps a sufficient answer is that it is never mandatory on the Commission to value the interest of any lessee on the basis of the cost, though such a method may in certain circumstances be appropriate as an exercise of discretion. But other answer are available, if this be thought inadequate. There can be no doubt that, even in its application to a sole lessee, the method of valuing a lease on the basis of the cost of the property demised is, at best, a rough and ready approximation. Even so, the formation of a rate base by treating a lessee as owner and measuring a fair return of income as a percentage of the cost may yield a reasonable average of accuracy where the interest of the lessee is constant, and the rentals that it pays are excluded from the computation of its operating expenses. Such exclusion is required by the accounting rules of the Commission where the lessee has the sole use. The practice is different, however, where a carrier has the benefit of joint facilities. There, the rentals paid for the use of the facilities are part of the operating expenses, and were so treated in the case at hand. This treatment of them has the support of statute (Transportation Act 1920; 49 U.S.C., § 15a(1)) [Footnote 3] as well as of administrative practice. A carrier chanroblesvirtualawlibrary
receives a duplication of benefits if it is permitted to include its rentals as an operating expense while earning a return upon the value of an unencumbered fee. [Footnote 4] Aside from this objection, a lease which gives to the lessee not exclusive possession of the property demised, nor even a fixed share, but a share fluctuating from time to time with the variations of the business, is too uncertain and inconstant to be valued with even approximate correctness by the test of the cost of the property subjected to the use. The Commission was satisfied to adopt the formula of cost where the lease was such as to lead it to believe that the margin of error would not be inordinately large. [Footnote 5] Nothing in the statute makes it mandatory to apply the same formula, inaccurate at best, to leases of a different nature if the margin of error would thereby be increased. [Footnote 6] Nor is there anything in the objection that, by force of § 15a of the Transportation Act 1920, a form of inventory permissible under § 19a of the valuation act of 1913 is permissible no longer. The Act of 1920 chanroblesvirtualawlibrary
The carrier did not build its case on that command in making proof to the Commission. It took the position, on the contrary, that it was an owner of the roadbed and the terminals in proportion to its use and made its proof accordingly. See Matter of New York, New Haven & Hartford R. Co., 30 I.C.C.Val.Rep. 1, 31, 32, 33. There can surely have been no breach by the Commission of an inflexible and certain duty in omitting from an inventory a separate and specific estimate of the difference between the value of the use and the rents reserved to the lessors when the protest of the carrier was silent as to what the valuation ought to be. The result will be the same, however, though this defect be overlooked. The command to report other elements of value does not impose a duty, inflexible and certain, to appraise the value of a use which is unrelated to the value of what is subject to the use. The ends to be attained are different. chanroblesvirtualawlibrary
Congress had no thought to tie the hands of the Commission by imposing a peremptory duty to classify in any particular way the factors supplementing or modifying the significance of cost, and to allocate to each a specific value. The report makes it clear that Congress did not know what those factors were, and that the Commission, guided by the courts, was to work out in its own way a practical and fair result. Whatever duty was imposed had its basis in a general admonition which left a wide and indefinite margin of judgment as to the method of obedience. chanroblesvirtualawlibrary
In the light of these considerations, the aim of the statute in bidding heed to be given to other elements of value than those of cost alone is readily discerned. Its aim is to afford play for the correction of the errors certain to result where the value of a railroad is identified with the cost of its component parts without reference to the values generated or extinguished by the union of the parts into a single and organic whole. Effects that are the resultant of two or more forces working in combination may be capable of appraisal when it would be difficult, if not impossible, to estimate the consequences of any one of the forces operating singly. For an illustration of this truth, we have only to bear in mind the obscure and varied factors, psychical as well as physical, that enter into the creation of the "going value" of a business. Not infrequently, the value of these intangibles will be an aggregate made up of elements too deeply interpenetrated for any specific figure to be set opposite to one of them dissevered from the others. What is true of "going value" is true of roadbeds and stations, of trackage rights and rights in terminals. As soon as one passes beyond an appraisal of the cost, the increments or the deductions involve estimates of relation, the parts being worthless or nearly so unless adapted to the whole. Not a mile of track would be worth the cost of reproducing it, nor a trackage right the rental, if there were not stations at either end. Not a station would be worth the cost of building it anew if there were not roadbeds or tracks or trackage rights beyond. The final value set down in the report of the Commission shows that, over and above the cost of reproduction less depreciation, something has been added, in appraising the property of the carrier, to express the value of the whole, as distinguished from the total of the parts. Not even the depreciated reproduction cost, let alone something in addition, would chanroblesvirtualawlibrary
A word may yet be due with reference to those provisions of subdivision b of the statute which are set forth chanroblesvirtualawlibrary
The rights of way there in view are those that involve an investment of the moneys of the carrier, and result in the possession of the land itself, the roadbed on which the tracks are laid. Georgia v. Cincinnati Southern Ry. Co., 248 U. S. 26, 248 U. S. 28. They do not include the privilege of hauling cars for a rental over the roadbed of another. What is true of rights of way is true also of terminals. If the New Haven has no interest in the improvements constituting the roadbed and the terminal stations sufficient to require a specific valuation of its interests under parts one and two of subdivision "first," it has none sufficient to require such valuation under subdivision "second."
We do not go beyond the necessities of the case before us in shaping our decision. Whether an inventory such as this one, omitting a specific valuation of important rights and interests, gives full or adequate effect to the intention of the lawmakers we are not required to determine. In later or collateral controversies, that question may be pertinent. For the purpose of this case, it is enough to hold, as we do, that the duty of specific valuation, if it exists, has been imposed upon the Commission too vaguely and obscuredly to be enforced by a mandamus. United States ex rel. Redfield v. Windom, 137 U. S. 636; Wilbur v. United States, 281 U. S. 206. One cannot rise from a study of the statute in the setting of its history and of the administrative practice under it and hold at the end an assured belief that the Commission has been commanded by the Congress to do the act omitted. chanroblesvirtualawlibrary
Where a duty is not plainly prescribed, but is to be gathered by doubtful inference from statutes of uncertain meaning, "it is regarded as involving the character of judgment or discretion" (Wilbur v. United States, supra), and mandamus is thereby excluded. The case at hand differs in essentials from Kansas City Southern Ry. Co. v. Interstate Commerce Commission, 252 U. S. 178, where a specific, unequivocal command, removed after the decision by an amendment of the statute, [Footnote 7] was laid upon the Commission to value a particular thing, and the Commission ignored the command to the extent of refusing to hear any evidence whatever. The ruling in that suit has been explained in later cases, and confined to its peculiar facts. Interstate Commerce Commission v. Waste Merchants' Assn., 260 U. S. 32, 260 U. S. 35; United States v. Los Angeles & Salt Lake R. Co., 273 U. S. 299, 273 U. S. 311.
Public policy forbids that the work of the Commission in the fulfillment of the stupendous task of valuation shall be hampered by writs of mandamus except where the departure from the statute is clear beyond debate. The report is not a stage in a judicial proceeding affecting this carrier or others. "It is the exercise solely of the function of investigation." United States v. Los Angeles & Salt Lake R. Co., supra, p. 273 U. S. 310. The final valuations made in it will indeed be prima facie evidence against the carrier in proceedings under the Commerce Act. 49 U.S.C., § 19a(1). Even so, the opportunity to contest them if at any time they are introduced in evidence is "fully preserved to the carrier, and any error therein may be corrected at the trial." United States v. Los Angeles & Salt Lake R. Co., supra, p. 273 U. S. 313. The valuation of the railroads of the country has been ordered by the Congress in chanroblesvirtualawlibrary