Court Opinion

ID: 9418675
Source: CourtListenerOpinion
Date Created: 2023-08-02 22:35:16.825166+00
Date Added: 2024-06-11T16:49:50.188068
License: Public Domain

Dissenting opinion of
Mr. Justice Stone.
I agree with what Mr. Justice Brandéis has said and add a word only by way of emphasis of those aspects of the cáse which appear to me sufficient, apart from all other considerations, to sustain the finding of the Commission.
The report of the Interstate Commerce Commission is rejected and its order set aside on the sole ground that in a recapture proceeding under § 15 (a) of the Interstate Commerce Act, it has failed to consider present reproduction cost or value of appellant’s property and so to “'give *549due consideration to all the elements of value recognized by the law of the land for rate making purposes.”. No constitutional question is involved.
The Commission was called upon to value a railroad, with less than nine miles of main line track, which had been constructed prior to 1900. Much of its equipment was purchased before 1908, a considerable part being second hand. Its traffic was very largely dependent on the output of a few coal mines which it served.
In performing its task the Commissibn had before it the cost of reproduction new of appellant’s structural property, estimated on the basis of 1914 unit prices, " with the knowledge , that the costs of reproduction so arrived at were not greatly different from the original costs.” It had evidence of the actual cost of later additions and replacements, of the physical condition of the railroad and equipment, of the character, volume and sources of its traffic, of its working capital and revenues and expenses. It possessed, through its valuation department, special knowledge of the property of this carrier. Through its own experience it had the benefit of an expert knowledge of all the factors affecting, value of railway property growing out of changes in methods of transportation, of improvement in transportation appliances and the consequent obsolescence of existing equipment, of improvement in methods of railroad construction and consequent reductions in cost. Although it had estimates of present construction costs'in the form of index figures based on the comparative general price levels of labor and materials fcr 1914 and each. *,f the recapture years, which it considered and discussed in its report, there was no evidence before it of the actual present cost of construction of this or any other railroad or any affirmative showing that, if appellant’s road was to be built and. equipped anew, competent railroad engineers would deem the present structure and equipment suitable for or adapt*550able to the economical and efficient management contemplated by the statute.
After stating that it had before it the evidence above outlined, including that of reproduction cost, and such other matters as the carrier desired to bring to its attention, the Commission added, “ From this accumulated information we have formed our judgment as to the fair basic single sum values, not by the use of any formula, but after consideration of all relevant facts.” That the Commission gave consideration to present reproduction costs appears not only from its own statement, but from the fact that it gave full effect to increased current market values in determining the value of land and to additions and betterments since June 30, 1914, taken at their cost less depreciation. In the light of those consideratións which affect the present value of appellant’s structural property which Mr. Justice Brandéis has mentioned, I cannot say that the Commission did not have before it the requisite data for forming a trustworthy judgment of the value of appellant’s road or that it failed to give to proof of reproduction cost all the weight to which it was entitled on its merits. Had the Commission not turned aside to point out in its report the economic fallacies of the use of reproduction cost as a standard of value for rate making purposes, which it nevertheless considered and to some extent-applied, T suppose it would not have occurred to anyone to question the validity of its order.
I cannot avoid the conclusion that in substance the objection, now upheld, to the order of the Commission is not that it failed to consider or give appropriate weight to evidence of present reproduction cost of appellant’s road, but that it attached less weight to present construction costs than to other factors before it affecting adversely the present value of the structural property. That this was the real nature of the objection voiced by the dissenting Commissioners seems to me apparent from their opin*551ion. They seem to assume that as a result of Southwestern Tel. Co. v. Public Service Comm., 262 U. S. 276, and other cases in this Court, the Commission as a matter of law may never, under any circumstances, find that the value of the structural part of a railroad does not exceed its fair value of an earlier date, if the Commission has before it evidence of later increased construction costs. They say “ under the law of the land,” in valuing a railroad under § 15a “we must accord weight in the legal sense to the greatly enhanced cost of material, labor and supplies” during the recapture periods. Weight in the legal sense is evidently taken to be not that accorded by an informed judgment but imposed by some positive rule of law.
Without discussion of the- evidence and other data which received the consideration of the Commission, the opinion of this Court seems to proceed on the broad assumption that the evidence relied on, mere synthetic estimates of costs of reproduction, must so certainly and necessarily outweigh all other considerations affecting values as to require the order of the Commission to be set aside. In effect the Commission is required to give to such index figures an evidential value to which it points out they are not entitled when applied to railroad properties in general or to this' one in particular, arid this, so far as appears, without investigation of the soundness of the reasons of the Commission for rejecting them.
This Court has said that present reproduction costs must be considered in ascertaining value for rate making purposes. But it has not said that such evidence, when fairly considered, may not be outweighed by other considerations affecting value, or that any evidence of present reproduction costs, when compared with all the other factors affecting value, must be given a weight to which it is not entitled in the judgment of the tribunal “informed by experience ” and “ appointed by law ” to deal with the *552very problem now presented. Illinois Central, &c. R. R. v. Interstate Commerce Commission, 206 U. S. 441, 454. But if “ weight in the legal sense ” must be given to evidence of present const notion cosh;, by the judgment now given we do not lay down any legal rule which will inform the Commission how much weight, short of its full effect, to the exclusion of all other considerations, is to be given to the evidence of synthetic costs of construction in valuing a railroad property. If full effect were to be given to it in all cases then, as the Commission points out in its report, the railroads of the country, valued by the Commission in 1920 at nineteen billion dollars, would have had in that year a reproduction value of forty billion dollars and we would arrive at the economic paradox that the value of the railroads may be far in excess of any amount on which they could cam a return. If less than full effect may be given, it is difficult for me to see how, without departure from established principles, the Commission could be asked to do more than it has .already done — to weigh the evidence guided by all the proper considerations — or how, if there is evidence upon which its findings may rest, we can substitute our judgment for that of the Commission. Such, I believe, is the “due consideration” which the statute requires of “ all the elements of value recognized by the law of the land for rate making purposes.”
As I cannot say a priori that increased construction costs may not be more than offset by other elements affecting adversely the present value of appellant’s property, and as there was evidence before the Cdmmissión to support its findings, I can only conclude that the judgment below should be affirmed. In any case, in view of the statement of the Commission that it considered all relevant facts, including the elements of value brought to its attention by the carrier, I should not have supposed that we could rightly set aside the present order without some *553consideration of the probative value of the evidence of pres;rd reproduction costs which the Commission discussed '-it length in its report.
. Mf„ Justice Holmes and Mr. Justice Brandéis concur in this opinion.