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U.S. Supreme Court

Manufacturers Ry. Co. v. United States, 246 U.S. 457 (1918)

Manufacturers Railway Company v. United States

Nos. 24, 25

Argued March 21, 22, 1917

Decided April 15, 1918

246 U.S. 457


In a proceeding before the Interstate Commerce Commission to establish through route and joint rates over the Manufacturers Railway, a company operating terminals at St. Louis and held by the Commission to be a common carrier, though controlled and principally used by the intervening Brewery, and certain trunk lines at St. Louis, the contention was that the latter, in cancelling tariffs wherein they had applied their St. Louis rates to industries on the Railway and had absorbed its switching charges, and in continuing this practice as to another terminal -- St. Louis Terminal Railroad Association -- whose shares they owned, were guilty of unlawful discrimination, in avoidance of which the absorption should be reestablished.


(1) That the finding of the Commission, based upon difference of location, ownership, and operation, that there was not undue discrimination was not without evidentiary support, and not an abuse of discretion.

(2) That the Commission was justified by the evidence in holding that not more than $2.50 per car should be added to the trunk line rates for the Railway terminal, upon the ground that such limitation was necessary to avoid undue preferences or indirect rebates to the Brewery.

(3) That, as the controversy was not directed to the reasonableness of the trunk line rates, the Commission, in fixing the maximum joint chanroblesvirtualawlibrary

Page 246 U. S. 458

rate, properly assumed them to be reasonable per se, the "increased rate clause" of the Commerce Act, as amended (c. 309, 36 Stat. 552), does not lay upon the carrier the burden of proving a new rate reasonable when that question is not involved in the hearing.

(4) That the decision of this Court respecting the St. Louis Terminal Association ( 224 U. S. 224 U.S. 383, 224 U. S. 412; 236 U. S. 236 U.S. 194, 236 U. S. 207-209), left untouched the powers of the Commission, and complainants were entitled, at most, to have the Commission consider the nature and objects of the Association as circumstances bearing upon the question of discrimination and questions pertinent thereto.

In fixing joint rates, it is within the discretion of the Commission to allow the carriers to arrange the divisions, as contemplated by the first paragraph of § 15 of the Commerce Act (36 Stat. 551), subject to review by the Commission.

Whether a discrimination is undue or unreasonable or unjust is a question of fact confided by the Commerce Act, as amended (§§ 15, 16), to the judgment and discretion of the Commission, and upon which its decisions, made the basis of administrative orders operating in futuro, are not to be disturbed by the courts except upon a showing that they are unsupported by evidence, were made without a hearing, exceed constitutional limits, or for some other reason amount to an abuse of power.

A court cannot substitute its judgment for that of the Commission upon a purely administrative matter.

Common use of the facilities of the St. Louis Terminal by fourteen trunk lines owning its capital stock, under a single arrangement by which they absorbed the terminal charges, held not as a matter of law to entitle another terminal company, having no trunk line and doing terminal switching alone, to precisely the same treatment.

The district court has no jurisdiction under the Commerce Acts to exercise administrative authority where the Commission has failed or refused to exercise it, or to annul orders of the Commission not amounting to an affirmative exercise of its powers. So held where the Commission fixed maximum joint rates for trunk lines and a terminal company, and the gravamen of the latter's suit was the failure to fix the divisions.

A proper foundation for reparation was not laid in the evidence submitted to the Commission in this case.

Pending a proceeding before the Commission involving an inquiry as to how much could properly be allowed to a terminal as divisions or absorptions by trunk line carriers, one of the latter, which was chanroblesvirtualawlibrary

Page 246 U. S. 459

and remained a party, filed and published a tariff providing for absorptions of the terminal's switching charges up to a certain rate per car which it had previously allowed and retracted and was in the position of attacking in the proceeding as illegal and excessive. The Commission suspended the proposed absorption for 120 days from the effective date, and then for 6 months, to await its decision in the pending inquiry, treating the one as ancillary to the other and as involving no different question on the merits, and, upon deciding the original matter within the 6 months, cancelled the tariff without having given it a separate hearing. Held proper, and not inconsistent with the provisions of § 15, second paragraph, of the Commerce Act, as amended June 18, 1910, c. 309, 36 Stat. 552, respecting suspensions of new rates.

Although a rate-fixing order is not conclusive against attack upon the constitutional ground of confiscation, correct practice requires that the objection be made, and all evidence pertinent thereto adduced, before the Commission in the first instance, if practicable.

Where the Commission, after full hearing, sets aside a rate as unreasonably high, only a clear case would justify a court, upon evidence newly adduced but not newly discovered, in annulling the Commission's action upon the ground that the same rate was so unreasonably low as to deprive the carrier of its constitutional right of compensation.

The evidence produced and relied on in the district court by the complaining terminal, consisting of expert valuation of its leasehold and other property, calculations of revenue and expenses, with allocations to its interstate business, examined and held largely speculative, inconsistent with other evidence, in part based on erroneous theories, and, as a whole, insufficient to establish that a rate of $4.50 per car for interchange movements would be confiscatory.

The voluntary adoption of a rate by a carrier is some evidence against the carrier that it is remunerative.

In estimating the value of a leasehold to the lessee, taxes paid by the lessor should not be deducted from the annual cost as measured by the gross rental.

A finding by the Commission that a railway is a common carrier does not mean thatal cost as measured by the gross rental.

A finding by the Commission that a railway is a common carrier does not mean thatal cost as measured by the gross rental.

A finding by the Commission that a railway is a common carrier does not mean that all of its property must be treated as employed in the public service; portions used as a private plant facility should not be considered in determining the adequacy of a rate.

A city leased for railway purposes land, which in considerable part constituted a public wharf. Held that, if the rental was less than chanroblesvirtualawlibrary

Page 246 U. S. 460

the fair annual value, it must be presumed the excess was granted to the public, and not to the private interest of the carrier, in capitalizing it acts for the purpose of testing the adequacy of a rate.

In testing the adequacy of an interstate rate, it is error to base the computation on the receipts and expenses of the carrier's entire business without considering the adequacy of its charge for services not affected by the rate or their possibly private character.


These are appeals from final decrees made by the district court in two cases dismissing petitions filed by the appellants for the purpose of enjoining the enforcement of orders made by the Interstate Commerce Commission. The cases are closely related to each other, were argued at the same time, and will be disposed of in a single opinion.

The facts are intricate, and have been the subject of consideration by the Commission in three reports (21 I.C.C. 304; 28 I.C.C. 93; 32 I.C.C. 100), from which the following resume is taken:

Situate in South St. Louis, within the limits of the City of St. Louis, Missouri, and on the high ground back from the Mississippi River, are the great industrial plants of the Anheuser-Busch Brewing Association, a corporation, hereinafter called the Brewery, which occupy approximately 126 acres -- 35 or 40 city blocks -- intersected by streets. There are numerous structures in which are conducted the manufacture and marketing of beer and related products. The tonnage shipped by and to the Brewery is very heavy, amounting to upwards of 40,000 carloads per annum, or approximately one-thirtieth of all the inbound and outbound traffic of the entire city. For a number of years following the establishment of the Brewery, its inbound raw materials and outbound products were drawn by horse and wagon from and to the tracks of the St. Louis, Iron Mountain & Southern Railway Company, hereinafter called the Iron Mountain, chanroblesvirtualawlibrary

Page 246 U. S. 461

on the river front. In the year 1885, this method was abandoned, and a plant railway operated by steam was substituted. Two years later, the plaintiff Manufacturers' Railway Company was incorporated, hereinafter referred to as the Railway, to which control and operation of the plant system was made over. The Railway now has a main line of 2 1/4 miles, and approximately 23 miles of side tracks. It is engaged exclusively in the switching and delivery of carload freight within the City of St. Louis. The traffic of the Brewery constitutes about 75 percent of this total tonnage. At the time of the hearing before the Commission, it owned no cars, and only four locomotives, the cars used for the transportation of shipments originating on its line being furnished principally by the St. Louis Refrigerator Car Company, a substantial portion of whose stock is owned by the holders of a majority of the stock of the Brewery. The facilities of the Railway, however, for a considerable period and to a large extent had been available to the public, and it was held by the Commission to be a common carrier, and not a mere industrial or tap line. But a majority of the stock of the Railway was and is owned by the owners of a majority of the stock of the Brewery, so that the same interest controls both properties.

In the year 1888, the Railway leased its tracks to the Iron Mountain for ten years, and in 1898 renewed the lease for ten years. Up to this time, the only outlet from the rails of the Railway was to the main line of the Iron Mountain on the bank of the Mississippi River. In 1903, the Railway undertook a further development of its terminal facilities, and the city authorized several extensions along certain streets, and leased to it a part of a public wharf. In 1908, the Railway declined to grant a further lease to the Iron Mountain, and took over the operation of its property, with the object of enlarging and extending its facilities, serving the public in that chanroblesvirtualawlibrary

Page 246 U. S. 462

portion of the city generally, and connecting with all St. Louis lines by a junction with the St. Louis Transfer Railway.

The principal terminal facilities of the City of St. Louis are dominated by the Terminal Railroad Association, hereinafter referred to as the Terminal, a corporation whose capital stock is owned in equal shares by the 14 trunk lines entering that city. The Terminal, or its proprietary or tenant lines, owns or controls all bridges and ferries giving access to terminals within and lines directly entering St. Louis, so that no interstate shipment can enter or leave the city except over those lines. In St. Louis, there are three industrial centers naturally requiring terminal facilities. The northern section of the city along the Mississippi River is one of these, and is served by a considerable mileage of the Terminal and the rails of nine of the trunk lines. In the western section, in what is known as the Mill Creek Valley, there are many industries served by a considerable mileage of the Terminal and the rails of four of the trunk lines. In South St. Louis, the companies rendering terminal service are the Manufacturers' Railway and the Iron Mountain. The St. Louis Transfer Company, one of the subsidiaries of the Terminal, has a line along the riverbank, physically available only to a negligible extent, and the lines of the Iron Mountain generally follow the bank of the river and reach such industries as are adjacent thereto. For a considerable distance along the river in this section of the city, there is a steep grade to be overcome in reaching industries situate back from the river, and to confine these industries to the terminal facilities of the Iron Mountain would require a team haul up from the bank of the river. The Railway's terminals reach the high ground referred to, and, besides its connection with the Iron Mountain, it constructed in 1908 a viaduct leading over the Iron Mountain tracks and then descending to chanroblesvirtualawlibrary

Page 246 U. S. 463

their level and forming a connection with the tracks of the Transfer Railway, which lie between the Iron Mountain and the river. Through the Transfer Railway, it reaches the Terminal, and through the Terminal reaches all the trunk lines that enter St. Louis. The Transfer Railway is a corporation whose stock is owned by the Wiggins Ferry Company, whose stock in turn is owned by some of the trunk lines that own and control the Terminal.

The St. Louis Southwestern Railway Company, a trunk line hereinafter called the Cotton Belt, does not reach St. Louis with its own rails, but enters East St. Louis via the rails of the Iron Mountain, over which it has trackage rights. In serving industries within St. Louis, it uses the facilities of the Terminal and of the various carriers within the city, including the Railway.

By ordinance of the City of St. Louis, the Railway is prohibited from charging more than $2 per car for local switching. Prior to March 1, 1910, and including the entire 20-year period covered by the leases of the Railway to the Iron Mountain, the trunk lines applied their St. Louis rates to traffic originating at or destined to industries served by the Railway, absorbing and paying to the Railway, after the termination of the Iron Mountain lease, a switching charge of from $3 to $5.50 per car, said to average about $4.50. The result of this was that shippers served by the Railway received their transportation at the St. Louis rates without paying anything additional for the terminal service performed by the Railway.

At the same time, the trunk lines absorbed the terminal charges of the Terminal (about $3 per car), and similar allowances or absorptions were made by the trunk lines to twelve other industrial lines in and about the city.

About December 31, 1909, the trunk lines, by concerted chanroblesvirtualawlibrary

Page 246 U. S. 464

action, notified the Railway that from and after March 1, 1910, they would cancel the tariffs wherein they had applied the St. Louis rates to industries on the Railway and had absorbed the Railway's terminal charges. Similar notice was given to the twelve other industrial lines, and accordingly the allowances were cancelled at the date notified, but the practice of absorbing the charges of the Terminal was not discontinued.

On March 4, 1910, the Railway and certain shippers on its line, including the Brewery, filed a complaint against the trunk lines before the Commission (I.C.C. Docket No. 3151), in which it was alleged that the tariff cancellations were, in effect, an unjust and unlawful refusal by the trunk lines longer to continue through routes and joint rates theretofore established; that said action constituted an unlawful discrimination as between industries and shippers on the lines of the Railway and other industries and shippers in St. Louis, and subjected the traffic of the Railway to undue and unreasonable disadvantage, and gave undue and unreasonable preference to the shipping public in other parts of St. Louis, and further that the concerted action of the trunk lines was the result of an unlawful combination and conspiracy, in violation of the Sherman Anti-Trust Law. Complainants asked that through routes and joint rates be reestablished to and from points on the Railway from and to points on each of the trunk lines and points beyond, and that proper and reasonable divisions of the through or joint rates be established. There was also a prayer for reparation and for general relief.

The trunk lines answered, evidence was taken (none, however, being introduced by the trunk lines beyond such as was brought out by examination of complainants' witnesses), and, after a hearing, the Commission, under date June 21, 1911, filed a first report of its conclusions. 21 I.C.C. 304. It declared that the Railway was a chanroblesvirtualawlibrary

Page 246 U. S. 465

common carrier within the provisions of the first section of the Commerce Act, and not a mere plant facility of the Brewery; that it supplied reasonable and necessary terminal facilities to many industries besides the Brewery, and that the payment of it by the trunk lines of a reasonable and just portion of the St. Louis rates for the terminal service rendered by it was not unlawful; that the action of the trunk lines in cancelling the divisions and absorptions which for many years had been included in the St. Louis rates had subjected complainant shippers and a considerable portion of the public of South St. Louis to the payment of unjust and unreasonable transportation charges and to undue discrimination and disadvantage; that there had been in effect a failure on the part of the complainant carrier and defendants to agree to the apportionment or division of the rates or charges, and this situation under the statute imposed upon the Commission the duty of adjusting the matter; that, in view of the peculiar features of the case detailed in the report (including the heavy shipments to and from the Brewery and the fact that the same interests owned a majority of the stock of the Railway and of the Brewery), it was important that the allowances to the Railway and the services rendered by it to its patrons in consideration of such allowances should be equitably adjusted, and that the trunk lines should closely guard these features in making any allowances or divisions to the Railway, in order to avoid the charge of unjust discrimination or undue preference or advantage, but that the record before the Commission did not present a sufficient basis for a satisfactory determination of the question as to the reasonable and just division or allowance to the Railway, and the further question as to whether a part of the service performed by it was or was not plant facility service. These questions were reserved for further examination.

After the hearing, and before the making of this first chanroblesvirtualawlibrary

Page 246 U. S. 466

report, practically all of the carriers published and filed tariffs stating allowances or divisions with the Railway. These were suspended by the Commission pending its decision, and, upon the making of the first report, an order was entered cancelling the suspensions, effective July 15, 1911. No other order was made at that time.

Thereafter a supplemental hearing was had upon which additional evidence was submitted by the trunk lines, and as a result the Commission filed its second report, dated June 21, 1913 (28 I.C.C. 93), but still made no order. In this report, the Commission (p. 105) adhered to its former conclusion that the Railway was a common carrier subject to the act, but in other respects materially modified its views, now holding: that the payments formerly made out of their through rates by the trunk lines to the Railway were absorptions in compensation for services rendered to the trunk lines, and were not divisions of joint rates as for services rendered for the shippers served by the Railway, as they would be considered under joint rates prescribed by order of the Commission; that, in the absence of any undue discrimination with respect to these absorptions, the Commission could make no lawful order with reference thereto; that the defendant trunk lines, in delivering freight at the St. Louis rates to points on the rails of the Terminal and in refusing to bear the expense of similar delivery by the Railway upon its rails, were not subjecting the shippers located on and served by the Railway to undue prejudice and disadvantage; that therefore the only lawful order the Commission could make was in the establishment of joint rates, under which that part of the service performed by the Railway would be, in the contemplation of the Commerce Act, a service performed for the shipper, to be paid for by him, and not a service rendered for the trunk lines the expense of which could be required by the Commission to be borne by them; that the trunk line rates to chanroblesvirtualawlibrary

Page 246 U. S. 467

St. Louis not being shown to be unreasonable in themselves, the joint rates with the Railway necessarily must be in excess of these by the amount of the Railway's part of the through charge, and that joint through rates should be established on that basis. Taking up the question of the amount to be added to the trunk line rates in making the joint rates, the existing allowances being, as stated, from $3 to $5.50 per car, and complainants asking for a uniform allowance of $4.50 per car, said to be lower on the average, the Commission called attention to the fact that the Railway's rate for local shipments between any points on its line was $2 per car, fixed as a maximum by city ordinance; for intra-plant movements, availed of only by the Brewery -- that being the only industry having need for such service -- $1 per car, and for weighing movements 25 cents per car, and that the Railway had a contract with the Cotton Belt under which it handled shipments for the latter, under certain exemptions from liability for damage, for $1 per car, and had offered the same contract to other carriers. Considering these facts with the other testimony submitted on this phase of the case, the Commission expressed the opinion that the division of the joint rates accruing to the Railway should not exceed $2 per car, saying:

"However, we shall not by definite finding and order fix these divisions now. This is our original finding with respect to the establishment of joint rates, and the carriers, in accordance with the provisions of the act, will be given an opportunity to agree among themselves."

In conclusion, the Commission announced: "We regard the present allowances, which, as stated, average slightly above $4.50 per car, as effecting unlawful results."

Following the partial decision of the Commission in its first report, most of the trunk lines reinstated the allowances to the Railway, and those allowances, averaging about $4.50 per car, were being paid at the time of chanroblesvirtualawlibrary

Page 246 U. S. 468

the making of the second report. Pursuant to that report, they were cancelled.

In this situation, the Railway, the Brewery, and other complainant shippers applied to the Commission for a rehearing, and the case was reargued and taken under advisement November 13, 1913. Pending its decision, and on December 7, 1913, the Cotton Belt and another trunk line, both defendants in I.C.C. Docket No. 3251, published and filed with the Commission tariffs to become effective January 7, 1914, providing for absorption of the switching charges of the Railway up to $4.50 per car. These absorptions were suspended by order of the Commission December 19, 1913, until May 7, 1914, and by an order dated April 20, 1914, were suspended for a further period of six months, or until November 7, 1914. The suspension case was designated as Investigation and Suspension Docket No. 355, and was treated by the Commission as ancillary to the principal case, I.C.C. Docket No. 3151.

Under date July 10, 1914, and prior to the expiration of the second period of suspension, the Commission filed its third and final report, 32 I.C.C. 100. It affirmed the findings and conclusions contained in the second report, with an "interpretation;" still dealt with the Railway as a common carrier; held that the trunk lines by their action in cancelling the allowances to the Railway while continuing to absorb the charge of the Terminal, whose stock they owned, did not subject the Railway or its shippers to undue prejudice or disadvantage; that the amounts formerly paid by the trunk lines to the Railway were voluntary allowances, and could not be considered by the Commission to be divisions of joint rates which it could by affirmative order establish; that the separate rates of the trunk lines and of the Railway being necessarily regarded upon the record before the Commission as prima facie reasonable, any joint rates which chanroblesvirtualawlibrary

Page 246 U. S. 469

the Commission could by affirmative order require the carriers in the through route to establish would necessarily be higher than the trunk line rates to and from St. Louis by the amount of that part of the through charge which would accrue to the Railway; that, while the Commission could not require the trunk lines to participate with the Railway in joint rates no higher than their rates to St. Louis, they might voluntarily participate on that basis, provided that in the division they did not pay to the Railway for its service more than was just and reasonable, and did not thereby in the amount of the excess indirectly refund to the Brewery a part of the through transportation charges paid to them by the Brewery; that the former allowances of $4.50 per car paid by the trunk lines to the Railway were excessive, and, instead of a maximum division to the Railway of $2 per car, as suggested in the second report, upon further consideration, the view was expressed that the division accruing to the Railway should not exceed $2.50 per car, subject to modification upon further hearings with respect to divisions if the necessity should arise.

In announcing its purpose to make an order requiring the establishment and maintenance by complainant Railway and defendant trunk lines of maximum joint rates not exceeding the St. Louis rates of the trunk lines by more than $2.50 per car, the Commission declared that, when this had been done, whether the carriers in the through routes should establish rates on that maximum basis, or by voluntary agreement on a basis not higher than the St. Louis rates, then, upon failure of the trunk lines and the Railway to agree upon the proper basis of division, and upon request made to the Commission for the purpose, it would fix the divisions upon further investigation as provided in the act; if that inquiry should confirm its present impression that $2.50 per car was a reasonable division to the Railway, that would be granted, chanroblesvirtualawlibrary

Page 246 U. S. 470

and if, on the other hand, the Commission should be convinced by the evidence that $2.50 per car was too much or not enough, it would fix the amount accordingly, and that, if not asked by the carriers to fix the divisions, the Commission, upon proper cause appearing, might in its discretion institute an inquiry upon its own motion, under those provisions of the act which forbid the giving or receiving of rebates or undue concessions, directly or indirectly, by any device whatsoever, having in mind particularly the fact of the common ownership of Railway and Brewery stock.

Thereupon an order was made under I.C.C. Docket No. 3151, dated July 10, 1914, requiring the trunk lines and the Railway, on or before January 1, 1915, to cease and desist from charging their then present rates on traffic between points on the line of the Railway and points on the trunk lines in other states to the extent that those rates exceeded contemporaneous St. Louis rates by more than $2.50 per car, and to put in force on or before the same date and maintain thereafter for a period of not less than two years rates applicable to traffic on the Railway not exceeding rates contemporaneously in effect between St. Louis and points in other states by more than $2.50 per car.

At the same time, and upon the the basis of the same report, an order was made under I. & S. Docket No. 355, cancelling the Cotton Belt tariff that had been suspended by the orders of December 19, 1913, and April 20, 1914.

The former order of July 10 was attacked in a suit brought in the district court by the Railway, in which the Brewery and other shippers on the line of the Railway intervened as co-petitioners. Answers were filed by the United States and the Interstate Commerce Commission, evidence was taken, and, upon final hearing, the suit was dismissed without opinion. No. 25 is an appeal from chanroblesvirtualawlibrary

Page 246 U. S. 471

this decree. The orders of April 20 and July 10 under I. & S. Docket No. 355 were the subject of attack in a suit by the Railway and the Cotton Belt, in which answers were filed by the United States and by the Interstate Commerce Commission, and upon evidence taken, the court, without opinion, dismissed the petition. From this decree the appeal in No. 24 was taken. chanroblesvirtualawlibrary

Page 246 U. S. 477

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