Case Name: CHICAGO, ROCK ISLAND & PACIFIC RAILWAY CO. et al. v. UNITED STATES et al.
Court: Supreme Court of the United States
Jurisdiction: United States
Decision Date: 1931-11-23
Citations: 284 U.S. 80
Docket Number: No. 69
Parties: CHICAGO, ROCK ISLAND & PACIFIC RAILWAY CO. et al. v. UNITED STATES et al.
Judges: Me. Justice Holmes and Mr. Justice Brandéis join in this opinion.
Reporter: United States Reports
Volume: 284
Pages: 80–124

Head Matter:
CHICAGO, ROCK ISLAND & PACIFIC RAILWAY CO. et al. v. UNITED STATES et al.
No. 69.
Argued October 14, 1931. —
Decided November 23, 1931.
Mr. Frank H. Towner, with whom Messrs. Alfred P. Thom, W. F. Dickinson, R. N. Van Doren, R. V. Fletcher, Herbert Fitzpatrick, George F. Brownell, C. C. Paulding, Ben C. Dey, F. Barron Grier, Edward B. Jouett, W. R. C. Cocke, and L. E. Jeffries were on the brief, for appellants.
Assistant to the Attorney General O’Brian, with whom Solicitor General Thacher and Messrs. Charles H. Weston, Hammond E. Chaffetz, Daniel W. Knowlton, and H. L. Underwood were on the brief, for the United States et ah, appellees.
Mr. Robert E. Quirk for the South Manchester R. Co., appellee.

Opinion:
Me. Justice Sutherland
delivered the opinion of the Court.
This suit was brought in the federal district court for the northern district of Illinois to set aside parts of an order of the Interstate Commerce Commission made in a proceeding instituted by that body on its own- motion. The purpose of the proceeding was to investigate ".the rules for car-hire settlement between common carriers by railroad in the United States for the use and detention of freight cars while on the lines of carriers other than their owners, with a view to making such order or orders in the premises as maybe warranted by the record." All common carriers by railroad in the United States were made parties respondent. The Commission reopened and consolidated with the proceeding a number of cases theretofore pending before it, some of which had already been heard and decided. Elaborate hearings were had, at which, generally, the trunk line railroads were represented by the American Railway Association, and the short lines, by the American Short Line Railroad Association. A large amount of testimony was submitted, together with several hundred exhibits. The Commission filed two reports. The first will be found in 160 1. C. C. 369-448, and the second or supplemental report in 165 I. C. C. 495.
The original report discussed the case and concluded with nine specific findings, the first of which follows:
" 1. Common-carrier railroads, whether subscribers to the per diem agreement of the American Railway Association or nonsubscribers, are entitled to receive reasonable compensation in the form of a daily rental for the use of their general-service freight cars when on foreign lines, and that the present per diem charge of 11 per car-day reasonably compensates car owners for average car ownership and maintenance costs. The reasonableness of this per diem rate is not-questioned." '
No order was then made, but the .carriers affected were expected to conform to the findings and were left to modify their rules and. practices accordingly. The carriers having failed and refused to do so, the Commission issued its supplemental report and entered an order giving effect to its findings, by which order the respondents in the proceedings before the Commission were required, on or before October 1, 1930, to cease and desist, and thereafter to abstain, from applying rules for car-hire settlements in conflict with those prescribed by the Commission's order, and were required to establish, on or before that date, and thereafter to maintain and observe, rules with respect to car-hire' settlements which shall provide:,
" (1) That the same daily car rental shall be paid to common-carrier nonsubscribers as respondents contemporaneously pay to subscribers to the per diem rules agree ment of the American Railway Association, for the use of general-service freight cars.
" (2) That similar reclaim allowances shall foe made to nonsubscribers as to subscribers of the per diem rules agreement, in. connection with cars handled in terminal switching service, as the latter term is defined by the switching reclaim rules of the American Railway Association.
" (3) That short-line railroads which are less than 100 miles in length, and which return railroad-owned equipment to the road from which received, shall not be required to report per diem accruals to numerous car owners throughout the country, but shall be attached to their connecting carriers for purpose of car-hire settlement.
" (4) That common-carrier railroads which interchange freight cars with more than one subscriber railroad, and which deliver to one or more subscribing carriers, freight cars which are received from another such carrier, and railroads 100 miles or more in length, regardless of the number of railroads with which they connect, shall make' car-hire settlements direct with car owners in accordance with, the per diem rules.
"(5) That common-carrier railroads outside switching district's, other than those referred to in paragraph 4 hereof, shall pay per diem to connecting carriers on railroad-owned freight cars after deducting an average of two days free time per loaded freight car interchanged,, settlements to be made at the end of each calendar month, except that no car hire need be paid on cars received for return loading with coal from coal mines which are customarily dependent upon connecting carriers for car supply."
Thereupon, appellants, on behalf of themselves and other carriers similarly situated, brought this suit to. set aside paragraphs (2), (3) and (5) of the order. No complaint was made in respect .of paragraphs (1) and (4). The case was heard by a court of three judges, constituted as required by the Urgent Deficiencies Act of October 22,1913, 38 Stat. 220, U. S.C., Title 28, § 47. That court, without an opinion; made findings and conclusions sustaining the order of the Commission in all respects, and entered a decree of dismissal without .prejudice to further applications to the Commission for modification of the order, if, subsequently, injury or unfair results follow from the application of the order.
In the early history of railroad operation, through freight was transferred from the cars of one road to those of the connecting line at junction points. This resulted in waste of time and money, and the railroads themselves soon adopted the practice of permitting the loaded cars to pass from.their own tracks to those of the connecting roads, making a charge therefor. See In the Matter of Car Shortage, 12 I. C. C. 561, 573. For many years charges for interchanged cars were- on a mileage basis, but this was found impracticable, and a per diem rate generally was substituted. Finally, an agreement was entered into, known as the " Car Service and Per Diem Agreement," which provided for an interchange of cars subject to a code of rules adopted by the American Railway Association, the general principle of which was that payment should be made to the car-owning railroad for each day the car was off its lines. The railroads subscribing to this agreement are known as "subscribers," and other roads, as " nonsubscribers."- The subscribers, all members of the American Railway Association, comprise nearly 78 per cent, of the steam railroads in the United States; and these operate nearly 98 per cent, of the entire railroad mileage, and own 99.81 per cent, of all the railroad common carrier car equipment of the country. Carriers operating less than 100 miles of railroad are eligible.for associate membership but without, voting rights. At the time this case was heard by the Commission, the per diem rate was fixed at $1.00 per car. The rules required daily interchange reports in respect of all cars interchanged between subscribers. Generally, nonsubscribers were railroads operating short lines and owning little or, in some cases, no freight car equipment. Provision was made in the rules for a " reclaim allowance," that is to say, a refund, to railroads which had paid car rental, to the extent of the per diem expense incurred in' handling cars in terminal switching service. This rule was confined to subscribers, and no reclaim allowance was permitted to nonsubscribers for such service.
That the order of the Commission falls within the scope of its statutory powers is clear. Interstate Commerce Act, as amended by Transportation Act, 1920, c. 91, § 402, 41 Stat. 456, 476; U. S. C., Title 49, § 1 (10)-(14). Subdivision (14) provides:
" The Commission may, after hearing, on a complaint or upon its own initiative without complaint, establish reasonable rules, regulations, and practices with respect to car service by carriers by railroad subject to this Act, including the compensation to be paid for the use of any locomotive, car, or. other vehicle not owned by the carrier using it, and the penalties or other sanctions for nonobservance' of such rules, regulations or practices." • -
The authority of the Commission to institute the proceeding on its own motion, and to prescribe reasonable, rules relating to the subject of car service, and to prescribe reasonable compensation for the use. of the cars of one railroad by another railroad, is conceded. Nor is it disputed that under the law, in the operation of through routes, common carriers subject to the Interstate Commerce Act may be obliged to permit their car equipment to be carried beyond their own lines. See Missouri & Illinois Coal Co. v. Illinois Central R. Co., 22 I. C. C. 39. Appellants assail paragraphs (2), (3), and (5) of the order on the grounds that their provisions operate to take property without compensation, are not justified by the evidence, and are .discriminatory, unequal, arbitrary, and unreasonable;
First — Paragraph (2). Paragraph (1) of the order, which is not challenged, requires the same daily car rental to be paid to nonsubscribers as is paid to subscribers to the per diem rules agreement. Of this, paragraph (2) is the logical corollary. If nonsubscribers are entitled to be put-on terms of equality with subscribers in the matter of liability for car rental payments, it is hard'to see why they should not also be entitled to the same equality in respect-of refunds of such portions of "he payments as represent switching charges, provided, of course, that the nonsubscribers are also required to assume like obligation in respect of reclaim allowances when they in turn are owners of the used cars.' The two paragraphs, taken together and fairly interpreted, we think justify the conclusion that the obligations imposed and the benefits to be received are intended to be reciprocal, and put subscribers and non-subscribers, in respect thereof, upon terms of equality. That this is the view of the Government and of the Commission appears from the language of their brief, as follows:
" The Commission's obvious purpose was to place non-subscribers on an equal footing with subscribers. The order is directed against all the common-carrier railroads in the United States, including both subscribers and non-subscribers. The requirement that ' similar reclaim allowances shall be made to nonsubscribers as to subscribers ' can only mean that nonsubscribers and subscribers are' to be treated alike. . . . The order in any event does not prevent appellants and the other subscribers from modifying the per diem rules so as to require nonsubscribers to pay such allowances to the subscribers. Since appellants can themselves cure the defect which they allege in the Commission's order, they are not in a position to challenge the order on this ground."
This virtually amounts to a construction, by. the Commission of its own order in accordance with the view we have expressed. The suggestion that in so far as the short line .railroads can bring themselves within paragraph (5) of the order, this equality of treatment will fail, will be found to disappear when we come to deal with that paragraph.
Second — Paragraph (8). This paragraph -relieves the short line railroads of the class defined, i. e., those returning cars of other carriers to the road from which received,. from the burden of reporting per diem accruals to numerous car owners, and in effect, requires such reports to be made only.to their immediate connecting carriers. The objection urged to the paragraph is that it requires the connecting carrier to expend its money in keeping accounts and making reports and payments in respect of operating expenses of the short liné carrier, and thus amounts to confiscation- in the guise of regulation.
The classification which results in exempting railroads less than 100 miles in length from the necessity of making reports of per diem accruals separately to each of the-numerous car owners throughout the country is attacked as arbitrary- and unreasonable. We think it is neither. It is of a kind frequently made and frequently upheld by this court. St. Louis & I. M. Ry. Co. v. Arkansas, 240 U. S. 518, 520; Wilson v. New, 243 U. S. 332, 354, and authorities cited. Moreover, the car equipment of the country is substantially in the hands of the trunk lines, that owned by the short lines being almost a negligible proportion of the whole. And this fact affords some additional ground for the classification. Indeed, the classification was recognized as legitimate by appellants themselves, when they subscribed to the provision that such short lines should be permitted to become associate mem. bers only of the American Railway Association, but without voting rights.
Under the per diem agreement subscribers must report to each car owner as to cabs used, and pay the per diem charges to such owner; but in the case of nonsubscribers— who are not bound by the rules — the reports and payments are made to the immediate connecting subscriber carrier. The effect of paragraph (3) is to extend this privilege to the subscribing short line carriers as well. In other words, all short line railroads, whether subscribers or not, are put in a separate class and relieved from the burden of keeping account of a multitude of separate per diem charges, and reporting them separately to the various trunk lines.
Each of the trunk lines already maintains a large accounting force, and is obliged to keep account of cars received from other lines, including those turned- over to, and returned by, its connecting short lines. It fairly may be said that it will entail relatively little additional service to keep the accounts and make the reports, as required by paragraph (3). Each of these trunk lines in turn will be relieved from much of the burden and expense of dealing directly with non-connecting short lines; and it is not improbable that the benefits received will counterbalance the burdens, or at least go. very far in that direction. On the whole, we are unable to conclude that this part of the order imposes upon the connecting lines anything of substance that as a matter of law constitutes a part of the work of operating the short lines, or that the required change adds, anything to the operating expenses of such connecting carriers. On the other hand, as the record clearly shows, the keeping of these additional accounts, and the making of the vast number of reports to the numerous car owners throughout the country which would be required in the absence of paragraph (3), would put upon these short lines an-excessive and disproportionate burden.. It was estimated by one witness, and. not contradicted, that if the short lines were required to keep their accounts as they are kept by the trunk lines, it would impose an unnecessary burden upon the traffic of the country of approximately $500,000 per month.
The power to " establish reasonable rules, regulations, and practices with respect to car service by carriers by railroad," conferred by subdivision (14) of section 1, hereinbefore quoted, undoubtedly' includes the power to make reasonable rules prescribing forms and methods of accounting, reporting and distributing payments in re-, spect of such service. The Commission is here dealing with the railroad system of the country as a whole. A multitude of interrelated interests is concerned. The trunk lines, as owners, furnish in the main all the car equipment used by the short lines. These are . legitimate facts to be considered by the Commission in exercising its authority in respect of accounts; and these facts, and other facts and circumstances, justly may require that more of the clerical work shall be done by one of these classes than by the other.
The Commission is a body of trained-and experienced experts, and in respect of such.matters a reasonable degree of latitude must be allowed for the exercise of its judgment. The mere fact that, in application, mathematical accuracy in the adjustment of the burden may not be attained is not enough to put upon the Commission's order the stamp of invalidity. Primarily, the question is an administrative one, and unless the limits of reasonable regulation be transcended, the courts-may not interfere. The Commission concluded that the circumstances afforded warrant for requiring that class of railroads which generally owned the cars, which was best equipped to perform the clerical work, and which would receive the most in the way of compensating and offsetting benefits, to perform a larger- proportion of the service of keeping and rendering the accounts. In doing so, we are of opinion that it did not transcend the limits of reasonable regulation, and that the claim of confiscation is not sustained.
Third — Paragraph (5)'. This paragraph stands upon a different footing from those just considered. We do not find it necessary to review the various arguments made for and against the power of the Commission to make this part of the order. Section 1 (14), supra, authorizes the Commission to fix the compensation to be paid for the use of cars, etc., not owned by the carrier using them. This the Commission undertook to do, arid expressly found that, whether subscribers or not, all common carrier railroads were " entitled to receive reasonable compensation in the form of a daily rental for the use of their general-service freight cars when on foreign lines, and that the present per diem charge of $1 per car-day " was such reasonable compensation. In so doing it followed the direction of the statute. It then proceeded, however, by an order to grant to the short line railroads two days free time for interchanged loaded cars, and denied compensation altogether in the case of cars received for return loading with coal from coal mines customarily dependent upon connecting carriers for car supply.
That exceptions of this character could be made if applied to all. railroads, may be conceded, but that is not what was done. Here the Commission, having found that all railroads were entitled to receive a definitely fixed sum per day for every car used by a foreign line, entered an order relieving some of the railroads, in whole or in part, from such payments. Plainly this order is in flat opposition to the finding and cannot be permitted to. stand.
Confiscation • may result from a taking oJT the use of property without compensation quite as well.as- from the taking of the title. Chicago, M. & St. P. Ry. Co. v. Minnesota, 134 U. S. 418, 458; Reagan v. Farmers' Loan & Trust Co., 154 U. S. 362, 410, 412; Chicago, M. & St. P. R. Co. v. Wisconsin, 238 U. S. 491, 498-499. The use of railroad property is subject to public regulation, but a regulation which is so arbitrary and unreasonable as to become an infringement upon the right of ownership constitutes a violation of the due process of law clause of the Fifth Amendment. Atlantic Coast Line v. No. Carolina Corporation Comm., 206 U. S. 1, 20. And certainly a regulation permitting the free use of property in the face of an express finding that the owner is entitled to com-' pensation for such use cannot be regarded otherwise than as arbitrary and unreasonable.
If, as claimed, the. earnings of the short lines are insufficient to enable them to make full payment of car hire costs, the Commission may be able to afford a remedy by increasing the rates, or by a readjustment of the division of joint rates. New England Divisions Case, 261 U. S. 184; Beaumont, S. L. & W. Ry v. United States, 282 U. S. 74. It cannot be done by confiscating for then-benefit the use of cars of other railroads. Short lines, as well as .trunk lines, participating in joint rates, must furnish their share of the equipment. If they do not own cars, they must rent them. The Commission itself has pointed out very clearly the basis for this requirement. Virginia Blue Ridge Ry. v. Southern Ry Co., 96 I. C. C. 591, 593:
" The per diem that complainant pays for car hire is merely equivalent to interest, depreciation, insurance, taxes, and other car-ownership costs which it would have to bear if it owned, the cars used in interline traffic. The car owner incurs these costs in the first instance, and is reimbursed by complainant [a short line] through the per diem or, rental charges, thereby relieving the latter of' the necessity of investing ,in equipment for this service."
The case does not present a question of apportionment of car hire costs. The Commission undertook to deter mine, and did determine, what was a reasonable compensation for the use of cars, and definitely fixed that compensation on a per diem basis. It then, by its order,, denied such reasonable compensation in certain cases. This is in no proper sense an apportionment of expense, but a plain giving of the free use'of property for which, the Commission had concluded, the owner should be paid. We must deal with cases as they are made, not as they might have been made. To do otherwise, if we had' the power, would be only to invite confusion. What the Commission would do in a proper case of apportionment, involving many elements for consideration not now before us, we are not advised; and it has made no findings suitable to a determination of that matter.
We find no reason for applying a different rule in respect of the clause of paragraph (5) which altogether relieves the short lines from the payment of car hire on coal cars received for return loading with coal from mines customarily dependent upon connecting carriers for car supply. This is a blanket order in opposition to the express finding of the Commission quite as much as that part of the paragraph which grants to the short lines two days free use of cars. The general rule in respect of the obligation of a railroad, whether a Short line or a trunk line, to furnish equipment for the transportation of freight tendered to it, applies to the case of coal loaded at coal mines as well as to other traffic. Demurrage on Coal and Coke, 102 I C. C. 554, 557, 558, citing Brick from Michigan City, Ind., 42 I. C. C. 509, 511, where the general rule is stated. '
In the first named case the Tennessee Railroad, a short line, undertook, by a proposed tariff, to make a demurrage charge against cars held at coal mines, as an offset to per diem charges paid by it to the Southern Railway. The Commission, however, regarding the tariff as an attempt to transfer the railroad's car-hire expense to the coal operators, required the tariff to be canceled, saying: .
"Although respondent states that the proposed schedule .was published for the sole purpose of recovering its car-hire cost on cars under load, it would be applicable to all' cars. In other words, it would have the effect of-largely offsetting respondent's cost of car hire-by assessing shippers an amount equal thereto beyond a certain time. Respondent is under, obligation to furnish the equipment necessary for the transportation of traffic tendered to it, and if it does not possess such equipment the charges paid for the revenue [evidently meaning rental] thereof can not be considered as an item of expense which is not included in the rate."
There is nothing in § 1 (12) of the Interstate Commerce Act, as amended, which affords a basis for this part of paragraph (5), although the terms of thé order might sugr gest that this subdivision was relied upon. Section 1 (12) has relation only to the subject of car distribution, that is, to a " just and- reasonable distribution of cars " by each railroad " for transportation of coal among the coal mines served by it, whether located upon its line or lines or customarily dependeht upon it for car supply." See Assigned Car Cases, 274 U. S. 564, 577. The object of this provision was to insure a proportional distribution of all available coal cars so as to afford a fair and equal opportunity to each mine to enjoy their use on the basis of its rating. Baltimore & O. R. Co. v. Lambert Run Coal Co., 267 Fed. 776, 779. It has nothing to do with the question of compensation for the use of ears by non-owning railroads..That subject, as already appears, is covered by § 1 (14).
The part of the order [paragraph (5) ] now under consideration creates an exemption in favor of all short lines and against all connecting carriers, irrespective of varying circumstances, in the face of a general finding that all common carrier railroads are entitled to compensation in the form of daily rental for the use of care when on foreign lines. The language of the finding could not be more comprehensive. If followed, it necessarily compels payment of rental by the lines exempted as well as all other lines. It affords no justification for any exemption. We are not called upon to consider the evidence, since the Commission, upon the evidence, has made its findings. The vice of the situation is that, the order of the Commission, that is to say, its judgment, does not conform to its conclusions upon the facts. In disapproving this paragraph, we do not mean, for the present, to go beyond the precise case presented, or to pass upon the question of the authority of the Commission to make fair apportionment of car-hire costs, or, in special cases, .to make adjustments and afford a proper measure of relief in the matter, of payment of charges for the use of cars. Compare Ohio Farm Bureau Federation v. Ahnapee & W. Ry. Co., 89 I. C. C. 489, 499; Kanawha Black Band Coal Co. v. Chesapeake & O. Ry. Co., 142 I. C. C. 433, 442.
It follows that the court below should have set aside paragraph (5) of the order.
Decree reversed.
This case came to this court by appeal from the Circuit Court of Appeals and was remanded with a direction to dismiss for want of jurisdiction and without, prejudice. Lambert Co. v. Baltimore & O. R. Co., 258 U. S. 377.