U.S. Supreme Court
Darnell v. Edwards, 244 U.S. 564 (1917)
Darnell v. Edwards
Argued April 25, 1917
Decided June 11, 1917
244 U.S. 564
In determining whether railroad rates fixed by a state authority are confiscatory because not yielding a proper return, the basis of calculation is the fair value of the property used in the service of the public.
Therefore, when a railroad which was originally constructed and owned by two is operated by one of them under an arrangement whereby his interest will end and become vested in the other at the expiration of a term of years, the original investment of the operating owner should not be charged in annual installments against the annual operating revenue in determining whether the rates fixed are remunerative.
There is a strong presumption in favor of rates fixed by an experienced administrative body after a full hearing.
Rates should not be held too low upon evidence that they proved unremunerative chanroblesvirtualawlibrary
during a brief period, when condition for traffic were abnormally poor and little effort was made to improve them.
In determining the adequately of rates, the circumstance that the railroad has been unwisely built in an unfavorable locality, and the nature and value of the service actually rendered by it to the public, are matters to be considered.
Semble that, in testing the validity of rates affecting a limited class of traffic in which the railroad is for the time engaged, an extra cost of construction not justified by that traffic but incurred with a view to extending the road ultimately into more lucrative territory should not be accounted a a part of the fair value by which the rates must be gauged.
In the absence of a fair test of rates challenged as confiscatory, and in the presence of some doubt of their adequacy, dismissal of the bill should not be absolute, but should be without prejudice to another suit in case they should prove confiscatory when fully and fairly tested.
Final decree following 209 F. 99 modified and affirmed.
The case is stated in the opinion.