Opinion ID: 1483191
Heading Depth: 1
Heading Rank: 5

Heading: 1b Unprofitable Traffic.

Text: Mr. Meyer contends that perishable freight forced upon the Debtor caused losses in 1928 of $695,023.76; in 1929, of $1,160,375.66; in 1930, of $1,304,965.19; in 1931, of $1,322,273.51  a total loss of $4,482,638.12 in operating earnings during those years, thus materially contributing to impairment of earning and the financial condition of the Debtor. The perishables consisted of fruit, melons (principally cantaloupes) and vegetables (mainly lettuce). These were grown in the southern part of California for the most part, with some in Arizona. Shipments for such originated almost entirely on the Pacific. Transportation was in refrigerator cars of the Pacific Fruit Express  the stock in which was owned equally by the Pacific and the Union Pacific. Use of these cars was upon a mileage basis with refrigeration (icing) to be cared for by user railroad. To understand this contention by Mr. Meyer, it is necessary to know the situation with which it deals. Prior to 1927, the normal routing for such traffic  in so far as Debtor participated therein  was Pacific to El Paso, Texas & Pacific (a Missouri Pacific line) to Big Sandy, Texas, where Debtor took further carriage to Memphis or to St. Louis. May 5, 1927, Pacific and Debtor (then under Southern control) established a scheduled route for such traffic by Pacific to El Paso, Texas & New Orleans (a Pacific line) to Corsicana, Texas, whence Debtor carried to Memphis or St. Louis. This involved substitution of the Texas and New Orleans for the Texas and Pacific thus giving Pacific a longer haul by 897 miles (the Texas and New Orleans) and the Debtor a slightly longer haul (from Corsicana to Big Sandy). This new route is more circuitous than that using the Texas & Pacific and is somewhat farther south than that road  the Texas & Pacific being a fairly direct route in Texas from El Paso to Dallas or Big Sandy while the Texas & New Orleans dips southerly from El Paso and nearer the Mexican border. Mr. Meyer contends loss to Debtor on this traffic occurring mainly through rental charges for Pacific Fruit Express cars, return cost of empty cars and extra icing required by more southerly route. Mr. Meyer urges that this traffic was forced upon the Debtor by the Pacific although at the time this arrangement was made Debtor was under stock control of the Southern. The evidence is that Debtor desired this traffic. May 5, 1927 the traffic manager of Debtor sent a memorandum to its vice-president in charge of operations that the Pacific desired to establish a ninety-three hour schedule El Paso to St. Louis via Corsicana and asked prompt authorization so as to telegraph the Southern Pacific our concurrence, otherwise they will use the Frisco or M-K-T for this service. The same day, the traffic manager wired Pacific it would join in schedule and asked advice date first train leaves El Paso. As to one feature of this traffic, cantaloupes from the Imperial Valley, the evidence is clear as to the vigorous solicitation by Debtor, beginning in 1927. May 9, 1928 an official of Debtor wrote its traffic manager Corsicana route had the honor of handling first car of cantaloupes shipped out of the Imperial Valley this year by freight. Also, in 1928, after this route had been established for a year and while Debtor was yet under Southern control, Debtor was fearful that a speeded-up route then installed by Pacific to Shreveport might draw from this traffic via Corsicana. In 1938, during this reorganization, the general freight agent of Debtor at St. Louis became apprehensive that the cantaloupe traffic from the Imperial Valley was being taken over by the Missouri Pacific and St. Louis-San Francisco. It is difficult to understand this solicitude of Debtor's informed freight officials (during years of action under this schedule and at different times when not under Pacific control) to retain and guard this traffic if it was producing loss, much less the very substantial loss asserted by Mr. Meyer. Statements in the report of the Commission are as set forth in the footnote. [12] The conclusion of the Commission is that this traffic was carried at a small profit. The evidence is conflicting and we find there is material evidence supporting the conclusion of the Commission. A related contention of Mr. Meyer is that the Debtor, as part of the Pacific system, is entitled to receive a share of the Pacific Fruit Express earnings, at least in the proportion Debtor contributed to such earnings. There is no foundation for this position. While Pacific owns a controlling stock interest in Debtor just as it owns a half stock interest in Pacific Fruit Express, there is no legal basis for requiring Pacific to share its earnings in either company with the other. All three companies are separate corporations and are operated as such. The stockholders in Pacific are to be considered as well as those of Debtor.