United States v. Los Angeles & Salt Lake R. Co.
273 U.S. 299 (1927)

Annotate this Case

U.S. Supreme Court

United States v. Los Angeles & Salt Lake R. Co., 273 U.S. 299 (1927)

United States v. Los Angeles & Salt Lake Railroad Company

No. 414

Argued January 3, 4, 1927

Decided February 21, 1927

273 U.S. 299

APPEAL FROM THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF CALIFORNIA

Syllabus

1. A "final" valuation of the property of a railroad by the Interstate Commerce Commission pursuant to § 19 of the Act to Regulate

Page 273 U. S. 300

Commerce, as amended, is merely the statement of the result of an investigation, and is not such an order as may be reviewed by a suit against the United States to annul and enjoin the use of such valuation or "order" under the Act of October 22, 1913, or under the general equity powers of the district court. Pp. 273 U. S. 308, 273 U. S. 314.

2. The statutory provision making such valuations prima facie evidence in all proceedings under the Act to Regulate Commerce, and in all judicial proceedings to enforce that Act or to enjoin, set aside, annul, or suspend, any order of the Commission is not a violation of the due process clause of the Fifth Amendment justifying proceedings to annul the valuation order. P. 273 U. S. 311.

3. Paragraph (j) of § 19a, providing that

"if, upon the trial of any action involving a final value fixed by the Commission, evidence shall be introduced regarding such value which is found by the court to be different from that offered upon the hearing before the Commission, or additional thereto and substantially affecting the value,"

the proceedings shall be stayed so as to permit the Commission to consider the same and fix a final value different from that fixed in the first instance and to "alter, modify, amend or rescind any order which it has made involving such final value" does not refer to so-called orders fixing only valuations. P. 273 U. S. 312.

4 F.2d 736, 8 F 2d 747, reversed.

Appeal from a decree of the district court, annulling and enjoining the use of a valuation of a railroad property made by the Interstate Commerce Commission. The suit was by the railroad against the United States. The Commission intervened.

Page 273 U. S. 307

MR. JUSTICE BRANDEIS delivered the opinion of the Court.

This suit was brought in the Federal Court for Southern California by the Los Angeles & Salt Lake Railroad Company to enjoin and annul an order of the Interstate Commerce Commission purporting to determine the "final value" of its property under what is now § 19a of the Act to Regulate Commerce of February 4, 1887, c. 104, 24 Stat. 379, as amended by Valuation Act March 1, 1913, c. 92, 37 Stat. 701, by Act Feb. 28, 1920, c. 91, § 433, 41 Stat. 456, 474, 493, and by Act June 7, 1922, c. 210, 42 Stat. 624. San Pedro, Los Angeles & Salt Lake Railroad Co., 75 I.C.C. 463; 97 I.C.C. 737; 103 I.C.C. 398. The bill asserts that the order fixing the final value is invalid because it is in excess of the powers conferred upon the Commission, is contrary to the provisions of the Valuation Act, and violates the Fifth Amendment. It asserts also that irreparable injury is threatened.

Reasons why the final valuation is invalid are set forth specifically in 21 paragraphs and 35 subparagraphs of the bill. It charges that the Commission adopted rules for the valuation which are unsound and unwarranted in law; that, in the determination of values, it ignored facts and factors of major importance; that it refused to report

Page 273 U. S. 308

an analysis of the methods employed by it, although required so to do by the Valuation Act, and that it refused to comply with the requirement that all values and elements of value be separately reported. It charges that the valuation was made as of June 30, 1914, whereas it should have been made as of June 7, 1923; that the value found is that for ratemaking purposes, whereas the finding should have been a general one of value for all purposes; that properties enumerated were erroneously excluded from the valuation; that, in making the finding of value, the Commission erroneously failed to consider nine specified elements of value; that, in making the finding of investment in road and equipment it ignored six items; that, in making the finding of cost of reproduction new it ignored eleven items; that, in making the finding of cost of reproduction new less depreciation, it made thirteen errors; that, in valuing the lands, eleven errors were made, and that, in making the finding as to working capital, a large sum was arbitrarily deducted. It alleges that, for these and other reasons, the findings made are incomplete, erroneous in law, and misleading in point of fact.

The jurisdiction of the district court was invoked under the Urgent Deficiencies Act of October 22, 1913, c. 32, 38 Stat. 208, 219, and also under its general equity powers. The United States was named as defendant, and the Commission became such by intervention. Both defendants answered, but, by appropriate pleadings, the United States objected that the adoption by the Commission of the final valuation does not constitute an order within the meaning of the Urgent Deficiencies Act, challenged also the jurisdiction of the court to enjoin or annul the order under its general equity powers, and moved that the bill be dismissed. The motion was overruled, the case was heard on the pleadings and evidence, and, after proceedings which it is not necessary to detail, a decree was entered which annulled the final valuation and enjoined its use

Page 273 U. S. 309

for any purpose. Los Angeles & Salt Lake Railroad v. United States, 4 F.2d 736, 8 F.2d 747. Whether all or any of the claims and charges made in the bill are well founded we have no occasion to consider, for we are of opinion that the district court should have sustained the motion to dismiss the bill.

The final report on value, like the tentative report, is called an order. But there are many orders of the Commission which are not judicially reviewable under the provision now incorporated in the Urgent Deficiencies Act. See Proctor & Gamble Co. v. United States,225 U. S. 282; Hooker v. Knapp,225 U. S. 302; Lehigh Valley R. Co. v. United States,243 U. S. 412; United States v. Illinois Central R. Co.,244 U. S. 82, 244 U. S. 89; Delaware & Hudson Co. v. United States,266 U. S. 438. For the first 19 years of the Commission's existence, no order was so reviewable. T he statutory jurisdiction to enjoin and set aside an order was granted in 1906 because then, for the first time, the ratemaking power was conferred upon the Commission, and then disobedience of its orders was first made punishable. Hepburn Act June 29, 1906, c. 3591, §§ 2-7, 34 Stat. 584, 586-595. The first suit to set aside an order was brought soon after. Stickney v. Interstate Commerce Commission, 164 F. 638; 215 U. S. 215 U.S. 98. The jurisdiction conferred by the Hepburn Act was transferred, substantially unchanged, to the Commerce Court by the Act of June 18, 1910, c. 309, § 1, 36 Stat. 539, and, when that court was abolished, to the district courts, by the Urgent Deficiencies Act. The so-called order here assailed differs essentially from all those held by this Court to be subject to judicial review under any of those acts. Each of the orders so reviewed was an exercise either of the quasi-judicial function of determining controversies or of the delegated legislative function of ratemaking and rulemaking.

The so-called order here complained of is one which does not command the carrier to do, or to refrain from

Page 273 U. S. 310

doing, anything; which does not grant or withhold any authority, privilege, or license; which does not extend or abridge any power or facility; which does not subject the carrier to any liability, civil or criminal; which does not change the carrier's existing or future status or condition; which does not determine any right or obligation. This so-called order is merely the formal record of conclusions reached after a study of data collected in the course of extensive research conducted by the Commission through its employees. It is the exercise solely of the function of investigation. Compare Smith v. Interstate Commerce Commission,245 U. S. 33. Moreover, the investigation made was not a step in a pending proceeding, in which an order of the character of those held to be judicially reviewable could be entered later. It was merely preparation for possible action in some proceeding which may be instituted in the future -- preparation deemed by Congress necessary to enable the Commission to perform adequately its duties if and when occasion for action shall arise. The final report may, of course, become a basis for action by the Commission, as it may become a basis for action by Congress or by the legislature or an administrative board of a state. But so may any report of an investigation, whether made by a committee of Congress or by the Commission pursuant to a resolution of Congress or of either branch thereof.

The Valuation Act requires that the investigation and study be made of the properties of each of the rail carriers. There are about 1,800. 40 Annual Report Interstate Commerce Commission 13. In directing the Commission to investigate the value of the property of the several carriers, Congress prescribed in detail the subjects on which findings should be made, and constituted the "final valuations" and "the classification thereof" prima facie evidence in controversies under the Act to Regulate Commerce. Every party in interest is therefore entitled to

Page 273 U. S. 311

have and to use this evidence, and the carrier, being a party in interest, has the remedy by mandamus to compel the Commission to make a finding on each of the subjects specifically prescribed. Kansas City Southern Ry. Co. v. Interstate Commerce Commission,252 U. S. 178. But Congress did not confer upon the courts power either to direct what this "tribunal appointed by law and informed by experience," Illinois Central Ry. Co. v. Interstate Commerce Commission,206 U. S. 441, 206 U. S. 454, shall find, or to annul the report, because of errors committed in making it. Moreover, errors may be made in the final valuation of the property of each of the nearly 1,800 carriers. And it is at least possible that no proceeding will ever be instituted, either before the Commission or a court, in which the matters now complained of will be involved or in which the errors alleged will be of legal significance.

The mere fact that Congress has, in terms, made

"all final valuations . . . and the classification thereof . . . prima facie evidence of the value of the property in all proceedings under the Act to Regulate Commerce . . . in all judicial proceedings for the enforcement of the act . . . and in all judicial proceedings brought to enjoin, set aside, annul, or suspend, in whole or in part, any order of the Interstate Commerce Commission"

is, obviously, not a violation of the due process clause justifying proceedings to annul the order. That to make the Commission's conclusions prima facie evidence in judicial proceedings is not a denial of due process was settled by Meeker v. Lehigh Valley R. Co.,236 U. S. 412, 236 U. S. 430-431. It was there said of a like provision relating to reparation orders:

"This provision only establishes a rebuttable presumption. It cuts off no defense, interposes no obstacle to a full contestation of all the issues, and takes no question of fact from either court or jury. At most, therefore, it is merely a rule of evidence."

See also Mills

Page 273 U. S. 312

v. Lehigh Valley R. Co.,238 U. S. 473, 238 U. S. 481-482; St. Louis Southwestern R. Co. v. United States,264 U. S. 64, 264 U. S. 77.

Nor does the fact that "all final valuations . . . and the classifications thereof" are made prima facie evidence prevent the report from being solely an exercise of the function of investigation. Data collected by the Commission as a part of its function of investigation constitute ordinarily evidence sufficient to support an order, if the data are duly made part of the record in the case in which the order is entered. See Interstate Commerce Commission v. Louisville & Nashville R. Co.,227 U. S. 88, 227 U. S. 93; Chicago Junction Case,264 U. S. 258, 264 U. S. 262; United States v. Abilene & S. R. Co.,265 U. S. 274, 265 U. S. 286, 265 U. S. 290; Act of June 18, 1910, c. 309, § 13, 36 Stat. 539, 555. Inquests and inquisitions, if they were expressly authorized, are, at common law, admissible in evidence in judicial proceedings, thus constituting an exception to both the hearsay rule and the rule against opinion evidence. 3 Wigmore on Evidence (2d ed.) §§ 1671-1674. Some inquests are at common law also prima facie evidence of the facts found. Hughes v. Jones, 116 N.Y. 67.

Congress has provided adequate remedies for the correction of errors in the final valuation and the classification thereof. The conclusions reached by the Commission must be submitted first in the form of a tentative report. Section 19a, pars.(f) and (h). When so submitted, the carrier is authorized to file a protest and to be heard thereon. Paragraph(i). If such protest is filed, the Commission is directed to make in the report such changes, if any, as it may deem proper. Even if no protest is filed, the Commission may, of its own motion upon due notice to parties in interest, correct the tentative report. Compare New York, Ontario & Western Ry. Co. v. United States, post, p. 652. When the final report is introduced in evidence, the opportunity to contest the correctness of the findings

Page 273 U. S. 313

therein made is fully preserved to the carrier, and any error therein may be corrected at the trial. Specific findings may be excluded because of errors committed in making them. It is conceivable that errors of law may have been committed which are so fundamental and far-reaching as to deprive the "final valuations . . . and the classification thereof" of all probative force. Moreover, additional evidence may be introduced. Paragraph (j) provides that,

"if upon the trial of any action involving a final value fixed by the Commission, evidence shall be introduced regarding such value which is found by the court to be different from that offered upon the hearing before the Commission, or additional thereto and substantially affecting said value,"

the proceedings shall be stayed so as to permit the Commission to consider the same and fix a final value different from that fixed in the first instance, and to "alter, modify, amend or rescind any order which it has made involving such final value."

The district court rested jurisdiction to entertain a suit to set aside the valuation order largely upon the provisions of paragraph (j), believing that such a suit was within the scope of the words "upon the trial of any action involving a final value." That paragraph was intended to apply to actions brought to set aside rate-fixing orders in which the question of the value of the carrier's property would be material. In our opinion, it is not applicable to so-called orders fixing only valuations. The objection to entertaining this suit to annul the final valuation is not merely that the question presented is moot, as in United States v. Alaska Steamship Co.,253 U. S. 113, 253 U. S. 116, or that the plaintiff's interest is remote and speculative as in Hines Yellow Pine Trustees v. United States,263 U. S. 143, 263 U. S. 148. There is the fundamental infirmity that the mere existence of error in the final valuation is not a wrong for which Congress provides a remedy under the Urgent Deficiencies Act.

Page 273 U. S. 314

Little need by added concerning the further contention that the suit should be entertained under the general equity power of the court. Two arguments are urged in support of the proposition. One is that, since the Commission has, by reason of errors of law and of judgment, grossly undervalued the property, its report will, unless suppressed, injure the credit of the carrier with the public. The other is that the Commission may itself be misled into illegal action by the erroneous conclusions, and may apply them to the carriers' injury, since use of the final valuation is required in making rates pursuant to § 15a of the Act to Regulate Commerce, as amended by Transportation Act, c. 91, § 422, 41 Stat. 456; in prescribing divisions of joint rates under § 15; in determining the limit upon the amount of capitalization, in the event of a consolidation under § 5; in determining the propriety of an issue of securities, under § 20a; or as the basis of computation of the amount of excess earnings to be recaptured under § 15a. Neither argument is persuasive. The first reminds of the effort made in Pennsylvania R. Co. v. United States Railroad Labor Board,261 U. S. 72, to suppress the report of that board. The second reminds of the attempt to secure a declaratory judgment in Liberty Warehouse Co. v. Grannis, ante, p. 273 U. S. 70, and also of cases in which it was sought to enjoin a municipality from passing an illegal ordinance. Compare New Orleans Waterworks Co. v. New Orleans,164 U. S. 471, 164 U. S. 481; McChord v. Louisville & N. Ry. Co.,183 U. S. 483.

No basis is laid for relief under the general equity powers. The investigation was undertaken in aid of the legislative purpose of regulation. In conducting the investigation and in making the report, the Commission performed a service specifically delegated and prescribed by Congress. Its conclusions, if erroneous in law, may be disregarded. But neither its utterances nor its processes of reasoning, as distinguished from its acts, are a subject

Page 273 U. S. 315

for injunction. Whether the remedy conferred by the Urgent Deficiencies Act is in all cases the exclusive equitable remedy we need not determine.

Reversed.

MR. JUSTICE BUTLER took no part in the consideration or decision of this case.

Official Supreme Court case law is only found in the print version of the United States Reports. Justia case law is provided for general informational purposes only, and may not reflect current legal developments, verdicts or settlements. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or information linked to from this site. Please check official sources.