Chicago & Northwestern Railway Co. v. Railroad Commission

145 N.W. 216, 156 Wis. 47, 1914 Wisc. LEXIS 68

• Court: Wisconsin Supreme Court
• Decided: February 3, 1914
• Status: Published

Opinions

TiMLiN, J.

The appellant commenced this action against the respondent' as authorized by sec. 1797 — 16, Stats., to review an order of the respondent Commission bearing date November 23, 1912, requiring appellant to establish a rate of 1.7 cents per 100 pounds for the transportation of ice from Silver Springs, Wisconsin, to Milwaukee, Wisconsin, instead of the rate of two cents per 100 pounds theretofore existing, and awarding plaintiff reparation upon all shipments moved between said point's from January 16, 1911, to September 30, 1911, at the rate of three tenths of one cent for each 100 pounds transported.

The statute provides for a review of the orders of the Railroad Commission by action against such Commission instead of by appeal or writ. This is somewhat analogous to the ancient writ of error, the issue of which was considered for many purposes to be the institution of a new action to review the proceedings of the subordinate tribunal. But the questions presented by this action and the scope of review therein are matters wholly regulated by statute. The Commission is authorized by sec. 1797 — 12, npon complaint of any person that the rates are in any respect unreasonable or unjustly discriminatory, to notify the railroad complained of that such complaint has been made, and ten days’ notice of the time and place when and where such matters will be considered and determined müst be given to the railroad, and the parties to the controversy are entitled to be heard and entitled to process to enforce the attendance of witnesses. If upon such investigation the rate complained of shall be found to be unreasonable or unjustly discriminatory, the Commission is given power to make an order substituting therefor such rate as it shall have determined to be just and reasonable and which shall be charged, imposed, and followed in the future. It also has power to make such orders respecting such regulation, practice, or service as it shall have determined to be reasonable. The Commission may also proceed on its own initiative and make a preliminary investigation in order to ascertain whether sufficient grounds exist to warrant a hearing being ordered. Having determined this in the affirmative, notice is given to the railroad setting forth the rate investigated and fixing a time and place for a hearing on such rate. Notice may also be given in such case to other parties in interest. The railroad itself may also be complainant' before the Commission with like effect as though the complaint were made by any other person.

The Railroad Rate Commission Act of this state has a number of features distinguishing it from the federal Interstate Commerce Commission Act as originally adopted, and from the rate commission laws of some of the other states. Prominent among these distinguishing features are the initiative on the part of the Commission, the duty to find a fixed and definite point at which the rate will be reasonable, thus permitting the raising as well as the lowering of rates, also the provisions for review in the courts of the order of the Bail-road Commission, thus giving the carrier its “day in court” before the Commission and also before the circuit court.

By see. 1797 — 37ro the Commission is, in addition to the ordinary power to fix rates, also given the power, upon the complaint of any person aggrieved that a rate or charge exacted is erroneous, illegal, unusual, or exorbitant, to hear this complaint and decide upon the merits thereof in the manner provided by sec. 1797- — 12; that is, upon notice and hearing. If the rate or charge made is found to be erroneous, illegal, unusual, or exorbitant, the Commission shall find what in its judgment would have, teen a reasonable rate or charge for the service complained of. If this reasonable rate is less than the amount exacted, the carrier shall have the right to refund to the person making such charges the amount so found to be excessive. For very obvious reasons the Commission is not given power to enforce this refund. Its power of decision is only gwsi-judicial. But the party aggrieved may, after the findings of the Commission, maintain an action in the courts to recover the amount of such excessive charge as found by the Commission, and in the trial of this action the findings of the Commission are declared to be pmma facie evidence of the truth of the facts found by it.

The .proceeding in question was apparently taken by the Commission under the authority of secs. 1797 — 12 to 1797— 37m, and no objection is made and none can be made to this joinder in one proceeding. The statutory action against the Commission for review authorized by sec. 1797 — 16 is one to vacate and set aside any order of the Commission fixing any rate or rates, fares, charges, classifications, joint rate or ratee, or any order fixing any regulations, practices, or service. This action must he based on the ground that the rate, etc., fixed in such order is unlawful or that the regulation, etc., fixed in such order is unreasonable. FTo review of the order for a refund made under sec. 1797 — 37m is expressly provided for in such action, unless the order finding that a rate or charge is erroneous, illegal, unusual, or exorbitant, and finding what would have been a reasonable rate or charge, is included in the words of sec. 1797 — -16, “fixing any rate or rates, fares, charges, classifications, joint rate or rates, or any order fixing any regulations, practices or service.” Considering the remedial nature of sec. 1797 — 16, the quoted words last above may be taken to include the “would have been” finding required by sec. 1797 — 37m. The original complaint in this action did not seek to review that part of the order in question fixing rates for future traffic. The prayer of the complaint was “that a judgment be entered herein setting aside and holding for naught the order of said Commission (in so far as the same pertains to reparation) and for such other and further relief as to the court may seem just.” There was no averment in the body of the complaint to the effect that the rate fixed in such order is unlawful or that any regulation, practice, or service fixed in such order is unreasonable. See. 1797 — 16. Instead of this, it was averred that the order “was unauthorized and contrary to law for the reason that no evidence was presented by the complainant upon which such an order could be predicated; that the findings of fact made by the Commission are without authority or within the jurisdiction of said Commission.” “That the record upon which the Commission made its alleged findings of fact contained no evidence that the i;ates charged for the transportation of ice were exorbitant, unusual, illegal, or erroneous, and in fact found that said rate of two cents per hundred pounds, which rate was collected, was a ‘little higher than petitioner should be required to pay.’ ” “That under and by virtue of the státutes in such case made and provided said Railroad Commission is without authority to grant reparation unless it is found that the rate charged is exorbitant, unusual, illegal, or erroneous, and that, having no evidence upon which to base a finding required by law, said Commission exceeded its authority and was without jurisdiction to enter an order granting reparation.” The appellant by leave of court on the trial amended its complaint, striking out the words “in so far as the same pertains to reparation,” thus making the action an attack upon the order both as to rates and refund.

It is not required that the rate or charge be both erroneous, illegal, unusual, and exorbitant, but if it comes within either of these descriptive words the Commission shall find what in its judgment would have teen a reasonable rate or charge for the service complained of. Every rate or charge which is not reasonable and just under sec. 1191 — 3 may be found to be erroneous or illegal under sec. 1191 — 37m. Hence there is nothing in the complaint which shows absence ol jurisdiction on the part of the Commission to make the order complained of, unless it be an entire absence of evidence to support the findings or order of the Commission, or resting the order upon evidence taken in the absence of and without notice to the appellant. Doubtless the Commission is not required to proceed in this as in other respects with the strict formalities which obtain in courts of common-law and equity jurisdiction. But the statute contemplates a hearing and the taking of evidence in the matter of fixing rates. This is apparent from sec. 1197 — -12, which provides for notice and hearing, for the attendance of witnesses; of sec. 1797 — 13, which provides for administering oaths, issuing subpoenas, requiring production of documentary evidence, taking depositions, presence óf a stenographer who is to make a transcript in long hand of the evidence and proceedings; and sub. (b) of sec. 1197 — 16, providing that if, upon review in court, evidence shall be introduced by the plaintiff different from or additional to that offered at tbe bearing beforejhe Commission, the court shall proceed as there directed. CNevertheless from the administrative nature of the tribunal, the requirements of expert knowledge, the nature of the duties required, and the subjects considered, there must be a very considerable number of duties which the Commission is authorized to perform without the formality of trial or hearing or the formal taking of evidence. This is true of all administrative tribunals. There is also a vast amount of acquired expert knowledge which the Commission-may apply to facts in evidence, as, for illustration, when the number of tons hauled and the distance hauled and the whole cost is given, what part of it usually and ordinarily represents terminal expenses; the usual proportion of terminal expenses to miles hauled; the usual and ordinary ratio of distribution of freight charges according to the value of the product carried; what allowance or increase is usually and ordinarily made for size or bulk proportionate to weight; the average number of tons canned in a car; the ordinary proportion of empty to loaded cars; the ordinary consumption of fuel per train mile or per ton mile. or per passenger, and many other items of information which, while more difficult and complicated, are yet of the same nature as the expert knowledge of a farmer with reference to the number of acres which should constitute a day’s plowing; a merchant with respect to the usual percentage of cost of packing and delivery; a sailor with reference to the usual number of miles which should be made in a given time and in a given direction with a given direction and velocity of wind. None of these estimates are mathematically accurate, but long practice in making estimates of that kind makes one an expert.

No evidence was offered in the circuit court, except that the plaintiff offered a certified copy of the proceedings before the Commission, including the testimony taken. Erom this evidence it appeared that the commodity in question was ice of an inferior quality, the market value thereof, the distance hauled, the kind of cars used, the weight carried in a car, the distance carried (seven miles), the manner of loading and the disposition of the cars and cargo at the point of destination, the profit of the shipper, the shrinkage in the ice and the rates charged for transportation of this commodity by rail for different distances, in a great many instances in the same locality and in other localities on this road and on other railroads. These distances were not uniform, none of them the same distance over which complainant’s ice was shipped, and the railroad hauls varied from about twelve to sixty miles. There was also in evidence the former charge of the appellant for moving ice between the same points, which was something less than that fixed by the Commission, and it was shown, or at least testified to, that prior to 1905 the rate between the termini in question for ice of the kind in question was 1.5 cents per 100 pounds. Had neither party offered any evidence in the circuit court the order in question must have been affirmed (sub. (c), sec. 1797 — 16), and upon the plaintiff rests the burden of showing by clear and satisfactory evidence that the order complained of is unlawful or unreasonable. This is no great hardship on the railroad company, for it is in possession of all the evidence in its books and papers or in public records necessary for this purpose.

¡¿''What are just and reasonable rates is a question akin to questions of the reasonable value of services or the reasonable value of property which has no fixed market value. In the investigations of such questions great latitude of evidence is necessarily permitted, and one of the recognized bases of opinion or judgment in such matters is a comparison with the price paid or charged for other similar services or property. Stolze v. Manitowoc T. Co. 100 Wis. 208, 75 N. W. 987; Milwaukee & M. R. Co. v. Eble, 3 Pin. 334. See cases collected in 17 Cyc. 108, 109, 110; 16 Cyc. 1133 to 1145. Considering a similar question in tbe case of Interstate Comm. Comm. v. L. & N. R. Co. 227 U. S. 88, 33 Sup. Ct. 185, tbe court said:

“Tbe commission considered evidence and made findings relating to rates wbicb tbe carrier insists bad been compelled by competition, and were not a proper standard by wbicb to measure those here involved. The value of such evidence necessarily varies according to tbe circumstances, but tbe weight to be given it is peculiarly for tbe body experienced in sucb matters and familiar with tbe complexities, intricacies, and history of rate-making in each section of the country. So, too, the fact that a commodity rate is low may cast some light on tbe reasonableness of the higher rate on tbe class from wbicb that commodity was taken or to wbicb it might legally be restored. It is true that tbe old low locals, Mobile (west) to New Orleans, were maintained, while those from New Orleans (east) to Mobile were raised, is not conclusive against tbe reasonableness of new tariff put in force in 1907. But it was a fact tending to support tbe conclusion unless tbe difference was shown to have been warranted by proper rate-making. Of tbe sufficiency of tbe explanation, including the extent of tbe difference in empty car movement, tbe commission was authorized to judge. It also bad before it tbe company’s financial statement and general tariff sheets.”

It was accordingly there held that a rate made upon sucb facts was not unsupported by evidence. Where there is no fixed market value, this method of ascertaining tbe value, tbe quantum valebant, by comparison with other similar things in wbicb tbe element of value is known, or is better known, is primitive, old, and well established. It is subject to many infirmities and uncertainties like all attempts to explain or establish that illusive mental concept represented by tbe word “value” or that represented by tbe word “reasonable.” Tbe rates with which we compare may be themselves too .low or high, or tbe analogy may be imperfect and there may be only an apparent but' no real similarity to tbe case- in band. But nevertheless the comparison tends to inform the mind and guide the judgment, it narrows the subjective estimate of value which can never be wholly eliminated, and it is frequently the only external or objective guide. In legal inquiries it cannot be disregarded merely because not syllogis-tically or mathematically accurate. It tends to establish probability or improbability, as the case may be, and more than this, it' is indispensable in questions of unlawful dis-; crimination in rates. There was, therefore, as shown by the certified copy in evidence, testimony before the Commission' upon which it had a legal right to rely in fixing what is as well as what would have been a reasonable rate.

But' the principal contention of appellant is that the order' of the Commission fixing the rates and declaring the complainant entitled to reparation or refund was made in part upon evidence not produced before the Commission at the hearing nor brought to the attention of the appellant, hence that due process of law was denied to the appellant within the rule of the case last cited. The findings and order of the Commission are made at the foot of an opinion in which the Commission, after the manner of courts, sets forth in apparent explanation or justification of its decision the grounds upon which the same rest's. The appellant points to the following sentences as indicating that the Commission considered such extraneous evidence:

“But in this as in most eases, the principal basis for computing the reasonable rate is the cost' of the service to the carrier, and this cost has been ascertained in the present case by the methods often explained in decisions of this Commission. Considering the fact that the commodity involved is of comparatively low value in proportion to its weight, is transported in regular movements and is subject to little risk in transit, and considering also the rather heavy loading of ice and the fact that no extra equipment of any kind is necessary in handling it, it is apparent that this commodity is entitled to a comparatively low rate. While the rate must necessarily be sufficient to cover the actual expense of t'be service, the traffic is of a kind that should not be expected to contribute as much in the way of interest upon the railway company’s investment as does the average traffic on the line. An application of the principles just stated to the circumstances of this case seems to warrant the conclusion that the present rate of two cents per 100 pounds is a little higher than the petitioner should be required to pay. At the same time, the cost figures at hand do not at this time justify the Commission in fixing the rate as low as 1.5 per 100 pounds, the figure at which it was placed by the railway company up to about 1905. When the movement and terminal expenses of the railway company upon this traffic are properly adjusted to take account of the length of the haul and the other conditions peculiar to this traffic, it is found that a rate of 1.7 cents per 100 pounds is about fair as between the shipper and the carrier, and the establishment of such rate will be ordered.”

This falls very short of saying that the Commission acted without evidence or acted upon evidence of extrinsic facts or circumstances not legally before the Commission at the hearing. On the contrary, the statement is that the cost figures were at hand, and one of the bases, in fact the principal basis, for computing a reasonable rate was the cost of the service to the carrier, which cost had been ascertained by methods often explained in decisions of the Commission. Decisions here referred to are public records entitled to judicial notice (sec. 1797 — 37n) and are doubtless Buell v. C., M. & St. P. R. Co. 1 Wis. R. R. Comm. Rep. 324 (see pp. 340 et seq.); Pulp & Paper Mfrs. v. C. & N. W. R. Co. 2 Wis. R. R. Comm. Rep. 168; Ringle v. C., M. & St. P. R. Co. 7 Wis. R. R. Comm. Rep. 170. These show the complexity of the questions investigated, the methods of arriving at cost, and the bases of computation.

The railroad companies are required to report annually to the state board of assessments and in considerable detail (sec. 1215 — 5, Stats.), and this report constitutes a public document or record. In addition to this, all railroads are required to report in great detail to the Railroad Commission upon blanks prepared ahd sent out by said Commission (secs. 1791 — 18 to 1797 — 21), and these reports are made annually and comprise a volume of about 125 quarto pages each, are on file with the Commission, and constitute public records or documents. Of the same character is the freight tariff made and filed by each railroad company. These annual reports contain all the necessary data from which the cost of transportation per ton mile or per train mile and the apportionment of terminal expenses may be computed with as much accuracy as it is possible to compute, such cost. Space will not permit' the elaboration of this report, but it .may be said that for the entire system and for Wisconsin, separately, the total passenger revenue and the total freight revenue are separately stated. In like manner the total operating expenses and the account to which each class of items of this expense is chargeable is also set forth. The number of tons of freight earning revenue, carried, the number of tons carried one mile, and the number of tons carried per mile of road, and the average haul are given, the average amount of receipts for each ton of freight and the average receipts per ton mile and per mile of road, the number of employees engaged’ in each kind of occupation and the wages of each group, the switching and terminal expenses, the different commodities carried and the tons of each and the percentage which each forms of the whole tonnage carried, and many other data. These reports and the tariffs of freight rates filed by the several railroad companies constitute a sufficient basis more accurate and thorough than the ordinary statistical bases for a statistical computation of the cost to the railroad of any particular service such as that in question here. It is, of course, characteristic of all statistical computations that they deal with class-frequencies, ratios, and averages, and that slight errors may exist in the bases without materially affecting the result. In this case if there is any error in the bases it was made by the appellant itself, for the Commission had before it defendant’s report covering the period in question. In such case the actual average cost of the same kind of service may also be arrived at by the comparative method from like reports of other railroads performing the like service. The method of ascertaining what is a reasonable rate by a computation of the cost of service is here aided and supplemented by a comparison with what it' costs other roads to perform like services. We do not think it necessary that these public documents be formally offered in evidence before the Railroad Commission or certified up to the circuit court in every action brought to review an order of the Commission. All parties know of their existence, the appellant itself furnished a report covering the period in question, the cost of the services in question was a fact peculiarly within the knowledge of the appellant if within the knowledge of any person, and the statute justly throws the burden of proof upon the appellant in the matter of showing that the rate fixed by the Commission is unreasonable. The Commission and the court may take judicial notice of the contents of these public records, and both parties are at liberty to present computations therefrom in argument at any stage of the litigation, even in this court.

With reference to judicial notice see Paquete Habana, 175 U. S. 677, 20 Sup. Ct. 290; Caha v. U. S. 152 U. S. 211, 222, 14 Sup. Ct. 513, and cases cited; New York Indians v. U. S. 170 U. S. 1, 18 Sup. Ct. 531; Knight v. U. S. L. Asso. 142 U. S. 161, 12 Sup. Ct. 258; Gardner v. The Collector, 6 Wall. 499; State v. Swift, 69 Ind. 505; Larson v. First Nat. Bank, 66 Neb. 595, 92 N. W. 729; Central of Ga. R. Co. v. Butler M. & G. Co. 8 Ga. App. 1, 68 S. E. 775; Gordon, R. & Co. v. Tweedy, 74 Ala. 232; Scheffler v. M. & St. L. R. Co. 32 Minn. 518, 21 N. W. 711; McHenry v. Yokum, 27 Ill. 160. It is urged by the appellant that the words in the decision of the Commission aboye referred to must be taken to relate to reports of persons employed by the Commission under snb. (b) of sec. 1797 — 18, and the learned attorney general argues in support of the power of the Commission to use those reports without offering them in evidence. We do not find it necessary to decide this point and leave that question until it necessarily arises in a case, without expressing any opinion thereon. They certainly may use these for some purposes. It would be rather illogical, however, to presume that the Commission referred to these fragmentary and disconnected reports for the purpose of ascertaining cost of service when it had before it in official records a complete statistical basis for such computation in which many of the essential factors of distribution, average, and computation are made and verified by the appellant itself. The statutory presumptions in favor of the order of the Commission would require the appellant to prove that the opinion of the Commission refers to these reports of employees, if consulting such reports would constitute error, a proposition we are by no means disposed to admit. No such proof was made. The cost of the service is, of course, an important factor in fixing rates. What is a reasonable rate cannot be thus established with mathematical accuracy; the cost under one management may be less than under another. It must be prorated relatively, and the article carried and the risk of carriage and other factors must be considered.' It includes the proportion of the overhead or fixed expenses chargeable to such service as well as the disbursements for wages, fuel, wear and tear, and other items. It requires statistical skill and experience to properly apportion to any commodity its proportion of tho cost of the service, as the. cases cited from the reports of the Commission amply show. But this item of evidence of what is a reasonable rate is much more effective to narrow the field of mere subjective valuation than the unaided comparative 'method. Although the cost method does not altogether exclude subjective considerations, it is, as was said in the.opinion of tbe Commission, tbe principal basis for computing a reasonable rate and recommends itself to those wbo are seeking for a more just and accurate basis of rate-making. Tbe evidential bases for tbe application of tbis method are more certain and are always before tbe tribunal, and are tbe proper subjects of judicial notice when embodied in a public record or document. So that tbe Commission bad before it tbe testimony of witnesses tending to prove what would be a reasonable rate by tbe comparative method of ascertaining that fact. All tbis testimony was certified to tbe circuit court. At tbe same time tbe Commission bad before it these annual reports of tbe appellant and other railroad companies and their freight tariffs, of which judicial notice is taken, and these documents contain plenary evidence from which tbe cost of service in question could be computed with that inexact but substantial verity characteristic of statistical computations when properly made.

It must be held that tbe ruling of tbe Commission was based in tbe instant case on these two kinds of evidence, analyzed and illuminated by tbe expert knowledge and experience of tbe Commission members, and on nothing else. '

By the Court. — Tbe judgment of tbe circuit court is affirmed.

BabNbs, J., took no part.

Maeshall, J.

Tbe court is content to dispose of tbis case upon the ground that tbe Railroad Commission bad before it, including what it might properly have taken judicial notice of, evidence supporting its decision. My opinion enables me to concur, subject to further study, when my brethren shall see fit to take up and decide tbe more important questions which tbe parties came here to have answered.

I think, as said upon another occasion, — Income Tax Cases. 148 Wis. 456, 134 N. W. 673, 135 N. W. 164, — that in eases where all the people of the state are deeply interested in having a judicial determination of serious disputes affecting their welfare, and all are actually or in effect represented at the bar of the court and appealing to it for such determination, and it has ample jurisdiction to do.so, — there should he no effort to minimize the scope of the response; hut rather effort to make it as broad as the limits of the controversy in all its aspects. Why dispose of such a case upon one point and leave others, and perhaps, as here, the most important ones, undecided; making further judicial hearings necessary before those having to do with the great business activities of the state can know just what their rights are? Long periods of uncertainty respecting the law are harmful beyond measure.

I think the old method of deciding as little as actually necessary to the particular case, so that litigants must needs resort, again and again, to the court in order to settle an entire controversy, should be laid aside, especially in these cases having to do with the validity and scope of new and rather novel legislation. The court — instead of proceeding with that overcaution, as it seems to me though sanctioned by precedent — which increases judicial and professional labor in the end, gives rise to false ideas of the cause therefor, prolongs uncertainty, and saps private and public resources— should grapple with an entire controversy with all its major and material germane features, and rest from its labor only by the rendition of a broad, fully rounded out, efficient judgment in such cases of great public importance as this. The need therefor is such that this court should wash its hands as completely as practicable of even appearance of needless delay in giving such tribunals as the Railroad Commission and the parties who have to deal therewith all the aid which the judicial function enables it to give.

I appreciate that my associates are just as anxious as I am to deal as fully with matters presented here for decision as is judicious in cases as they arise, hut there is, at times, a difference in inclination to break away from the ancient method of reaching a conclusion for the case without deciding any more of the controverted questions involved than necessary.

The overshadowing matter of difference which led to this litigation, — the one which has, doubtless, particularly vexed the Railroad Commission and the parties required to appear before it, ever since the system of regulation administered by such a commission was created, — is whether the rights of parties can jurisdictionally and constitutionally be determined by it without all the essentials of a common-law hearing, — the incidents of reasonable notice and opportunity to be present, knowledge of the matter to be investigated, reasonable opportunity to produce witnesses, knowledge of all the adverse evidence to be considered, and opportunity to oppose it with evidence. Does the Commission exceed its jurisdiction and so incapacitate itself from rendering a valid decision by grounding its action on evidence gathered, ex parte, by its employees or its own members and not known to the contestants ? Must it proceed in the manner indicated as ju-risdictionally requisite in Ekern v. McGovern, 154 Wis. 157, 142 N. W. 595, and as is generally required of a quasi-judicial tribunal, keeping and preserving a record of all the evidentiary bases of its decision, so that it may be attacked directly for jurisdictional error, or impeached collaterally as void for such error ? I would meet these questions now and solve all uncertainties, once for all, so far as this court could accomplish that much desired result. I may well repeat, in effect, what I said in the Income Tax Cases. The field untouched by the decision was as fully covered by eminent counsel as it is liable to ever be, all interest's call loudly for its chosen .instrumentality for such work to grapple with that now presented with urgent appeal for the task to be performed, While it is according to precedent to minimize the judicial response to the actual necessities of tbe particular situation, I would cast aside the hindrances to real judicial progress and judicial efficiency, where the court has competency in that regard. I think progress along that line would go far to obviate seeming faults in the law and the common impatience with the law’s delays.

Erom what I have here said, I appreciate that my concurrence with the result reached by the court rests largely on my apprehension that' the Railroad Commission, in administering the legislative system for public utility regulation, is not fenced about by the common requirements of hearings by qmjsi-judicial tribunals, except in so far as they have been wrought into the written law; but I forego discussion of the subject, preferring to let such discussion wait upon some future occasion therefor.