A car company leased, on a monthly rental basis, tank cars to a
shipper for the transportation of the latter's products in
interstate commerce, the contract providing that tariff car mileage
allowances from railroads for the use of the cars should be
collected by the car company and be credited monthly to the rental
account of the shipper. The tariffs contained no provision for
payment of such allowances directly to the shipper, and, under the
carriers' rules, they were paid in this case to the car company.
The car company subsequently refused to pay to the shipper any
excess of car-mileage allowances over the stipulated rents, on the
ground that it would thus be participating in illegal rebating. The
shipper thereupon brought suit in assumpsit upon the lease to
recover the amount of such excess.
1. The suit was within the jurisdiction of the District Court,
since the action was an ordinary one in assumpsit on a written
contract and the court had jurisdiction of the parties. P.
308 U. S.
Page 308 U. S. 423
2. Upon disclosure of the terms and operation of the lease
contract, the court should not have proceeded to adjudicate the
rights and liabilities of the parties in the absence of a decision
by the Interstate Commerce Commission with respect to the validity
under the Interstate Commerce Act of the practice involved. P.
308 U. S.
The shipper furnished the cars, and was entitled, under § 15(13)
of the Interstate Commerce Act, to a reasonable allowance therefor.
No rule or regulation of the carrier may provide for the payment of
such allowance to any other person. That the car company acted
merely as collecting agent for the shipper does not take the case
out of the jurisdiction of the Commission. The inquiry into the
lawfulness of the practice under the lease is peculiarly within the
competence of the Commission.
3. The cause should not be dismissed, but should be held pending
the conclusion of an appropriate administrative proceeding, thus
saving to the defendant any defenses which it may have. P.
308 U. S. 433
104 F.2d 903, 916, reversed.
p. 533, to review the reversal of a
judgment for the petitioner in a suit brought by the respondent
upon a contract of lease.
MR. JUSTICE ROBERTS delivered the opinion of the Court.
This was an action in assumpsit brought by the respondent to
recover a sum alleged to be due it by the petitioner under the
terms of a car leasing agreement. The answer admitted the execution
of the agreement,
Page 308 U. S. 424
but pleaded that payment of the sum demanded would amount to the
making of a rebate, contrary to the provisions of the Elkins Act.
] The District Court
rendered judgment for the petitioner which the Circuit Court of
Appeals reversed, holding the respondent entitled to the full
amount claimed. [Footnote 2
granted certiorari on account of the importance of the question
involved and of the
Page 308 U. S. 425
allegation that the judgment was not in accord with prior
decisions of this court. 308 U.S. 533.
The petitioner is a corporation, unaffiliated with any railroad,
which owns and leases tank cars to railroads and to shippers for
use in transportation in interstate commerce. The respondent is a
wholly owned subsidiary of El Dorado Oil Works, a manufacturer of
coconut oil operating a plant at Berkeley, California, and brought
the action as assignee of the latter's rights under the lease.
September 28, 1933, the petitioner and the Oil Works entered
into an agreement whereby the former leased to the latter fifty
tank cars designated in the contract as "permanent cars," at a
rental of $27.50 per car per month. The petitioner agreed to supply
the Oil Works with such additional cars as it might need for the
shipment of its products, on a rental basis of $30 per car per
month, these to be ordered from time to time as needed and returned
when no longer required.
The contract provided that the petitioner would collect, and
credit to the rental account of the Oil Works each month, all
mileage earned by the cars while in the Oil Works' service,
"according to and subject to all rules of the tariffs of the
railroads." The petitioner was to pay the cost of repairs and
maintenance, but the Oil Works was to be responsible for damage or
destruction of the cars while on privately owned tracks.
The leased cars were used by the Oil Works for shipment of its
products. Such use was important to the Oil Works, since the
railroads serving its plant were not prepared to furnish shippers a
full supply of the kind of cars needed for carrying the oils in
question. The railroad tariffs, though stating rates on the Oil
Works' products when shipped in tank cars, disclaimed any
obligation to furnish cars of the requisite type.
Page 308 U. S. 426
The carriers maintain tariffs applicable to the allowances to be
made to car owners for the use of tank cars, which provide for
payment of one and one-half cents per car mile loaded and empty.
The tariffs also embody rules which, during part of the period in
controversy, stated that mileage payments would be made only to the
party whose reporting marks appeared upon the cars and during part
of the period that "mileage for the use of cars of private
ownership will be paid for loaded and empty movements only to the
car owner -- not to a lessee." The rules precluded payment of the
mileage allowance to the Oil Works under the circumstances of this
case, since the lease stipulated that all the leased cars should
bear the reporting marks of the petitioner.
The petitioner complied with the provisions of the agreement
until July 2, 1934, when the Interstate Commerce Commission
rendered its decision in Use of Privately Owned Refrigerator Cars,
201 I.C.C. 323, in which it considered the payment of mileage
allowances to shippers either directly or through car owners, which
payments exceeded the total of the agreed rental for the use of the
cars and any additional actual expenses of the shipper in
connection with the cars. In that case, the Commission held that
such payments operated to give the lessee transportation of his
products at lower rates than those paid by other shippers who use
cars furnished by the carriers and thus amounted to a rebate from
the published transportation rates. The petitioner's practice had
been to collect the mileage, deduct the rental due, and pay over
the balance monthly. After the rendition of the Commission's
decision, the petitioner collected the mileage from the railroads,
credited the Oil Works with the rental due, retained the balance,
and refused to pay it over. The ground of its refusal was that to
follow the former practice would render it a participant in illegal
Page 308 U. S. 427
It was disclosed at trial that, throughout the period covered by
the respondent's claim, the mileage allowances had, in every month,
exceeded the rentals, leaving a substantial balance which the
respondent insisted should be paid to it. During the seven month
period from November 1, 1934, to May 31, 1935, this balance
amounted to $17,614.13.
The District Court concluded that payment to the shipper of any
excess of the mileage allowances over stipulated rents would
constitute a rebate prohibited by the Elkins Act, and, in that
view, held that the respondent could not recover. The Circuit Court
of Appeals permitted a recovery on the ground that § 15(13)
] of the Interstate
Commerce Act authorized the payment of mileage allowances by
railroads for the use of private cars furnished by shippers for the
transportation of their own commodities; that the practice had been
approved by the Commission, and maximum rates fixed by it; that the
one and one-half cents per car mile allowance appeared in the
carriers' published tariffs dealing with the subject and was, and
would remain until action by the Commission, the legal rate payable
for the use of such cars; that, while it is open to the Commission
to inquire, on its own motion or on complaint, as to any abuses in
connection with such tariff mileage allowances, until the
Commission does act, the carriers are justified in continuing to
pay the scheduled rates; that the shipper in this case is the
furnisher or supplier of privately owned cars to the carriers, and
the lease agreement constitutes the petitioner a mere agent for the
collection and payment of the mileage allowances to the shipper,
and that, consequently, the payment, by the petitioner to the
shipper, of any excess of the mileage earnings is not a rebate
within the terms of the Elkins Act.
Page 308 U. S. 428
The petitioner insists that this conclusion is wrong, and that
of the District Court correct. The Interstate Commerce Commission,
as a friend of the court, has filed a brief in which it contends,
first, that the District Court was without jurisdiction to
entertain the cause, as the question involved is one primarily for
administrative action by the Commission and, secondly, that the
payment of the excess credits by the petitioner would result in
payment of a prohibited rebate to the shipper.
We hold that the District Court had jurisdiction but that, upon
disclosure of the terms and operation of the lease contract, it
should not have proceeded to adjudicate the rights and liabilities
of the parties in the absence of a decision by the Commission with
respect to the validity of the practice involved in the light of
the provisions of the Interstate Commerce Act.
Freight cars are facilities of transportation, as defined by the
Act. [Footnote 4
] The railroads
are under obligation, as part of their public service, to furnish
these facilities upon reasonable request of a shipper, [Footnote 5
] and therefore have the
exclusive right to furnish them. They are not, however, under an
obligation to own such cars. They may, if they deem it advisable,
lease them so as to be in a position to furnish them according to
the demand of the shipping public and, if the carriers do so lease
cars, the terms on which they obtain them are not the subject of
direct control by the Interstate Commerce Commission. [Footnote 6
] If the carriers pay too
much for the hire of such cars the Commission may, of course,
refuse to allow them to reflect such excess cost in their tariffs.
The lessor of such cars to a railroad, however, is not itself a
carrier or engaged
Page 308 U. S. 429
in any public service. Therefore, its practices lie without the
realm of the Commission's competence.
Cars thus leased and used by the carriers are to be
distinguished from so-called private cars with which we are here
concerned. Shippers, particularly those who require a specialized
form of freight car for transportation of their products, may and
do own cars adapted for the purpose. They may and do, in lieu of
owning such facilities, rent them from the owners. Car companies
owning a large number of a special type of freight car, some
affiliates or subsidiaries of railroads and others, like the
petitioner, wholly independent and financed by private capital,
have for many years been in the business of leasing cars to
shippers. The practice has been well known and well understood. It
is entirely lawful, and the Commission has so held. [Footnote 7
] But the practice cannot modify
the requirements of paragraph (13) of § 15, [Footnote 8
] which governs the payment of
allowances for private cars and invests the Commission with
authority to find and declare what allowances are reasonable.
As the Circuit Court of Appeals has pointed out, different
shippers may have differing costs in respect of privately owned
cars furnished the carriers. Nevertheless, as the allowances to be
made them by the carriers
Page 308 U. S. 430
for the use of such cars must be the subject of published
schedules, [Footnote 9
must be just and reasonable, [Footnote 10
] the Commission is compelled to ascertain in
the light of past and present experience a fair and reasonable
compensation to cover such costs and prescribe a uniform rate which
will reflect such experience. It is inevitable that some shippers
may be able to furnish facilities at less than the published
allowance, while others may find their costs in excess of it. This
fact, however, does not militate against the fixing of a uniform
rate applicable to shippers properly classified by the Commission.
From what has been said, it results that the shipper in this
case was permitted by law to furnish freight cars for the
transportation of its products and to be paid a reasonable
allowance for performing this portion of the public service which
the carrier was bound to render, and that the law requires that the
amount and conditions of payment of such allowance shall be set
forth in a published tariff. If this is not done, the shipper may
complain to the Commission, to the end that a proper allowance be
ascertained and made effective by a schedule duly published. In the
present case, this has not been done. Nor has the shipper ever
applied to the Commission for its decision as to what was a proper
allowance for the cars furnished by it.
As we have stated, the mileage tariffs published by the American
Railway Association, which govern the instant case, require that
private cars be marked with so-called reporting marks or initials
together with a car number. These marks are for the purpose of
keeping records of the car's movements and mileage. Appropriate
marks to designate privately owned cars are assigned by the
Page 308 U. S. 431
Association to their owners. The rules appearing in the tariff
during a portion of the period in question provided that the
mileage for the use of cars of private ownership would be paid to
the car owner or to the party who had acquired the car or cars as
shown by the permanent reporting marks. The lease agreement
provided that the cars should bear the reporting marks of the
petitioner. Thus, the carrier was bound by its rules to pay the
allowance to the petitioner. During a portion of the term in
controversy, the rules provided that mileage could be paid only to
the car owner, not to a lessee. Here again, the rules precluded the
payment of the allowance by the carrier to the shipper.
The Circuit Court of Appeals has held, and we think correctly,
that the shipper -- the Oil Works -- furnished the cars to the
carrier in the present instance. The petitioner did not. The
shipper was then entitled, under the plain terms of § 15(13), to be
paid by the carrier a just and reasonable allowance for providing
the facility. It seems clear that no rule or regulation of the
carrier may provide for the payment of such allowance to any other
person. And we think the consideration that, in this case, the
petitioner acted merely as collecting agent for the shipper does
not take the case out of the Commission's jurisdiction. If it
should appear that, with respect to the tank cars in question, the
shipper-lessee is making substantial profits on leased cars, by
reason of the excess of the mileage allowances over the rentals
paid, it might, in the light of all the facts, be found that the
shipper is, in the result, obtaining transportation at a lower cost
than others who use cars assigned them by the carriers or own their
own cars. The Commission has found that, in the case of
refrigerator cars held under similar leases, this has been the
case. [Footnote 12
inquiry into the lawfulness of the practice
Page 308 U. S. 432
is one peculiarly within the competence of the Commission.
As the tariffs now contain no provision for the payment of car
mileage allowances by the railroad to the shipper directly, and as,
upon the face of things as disclosed by this record, the shipper is
apparently reaping a substantial profit from the use of the cars, a
clear case is made for the exercise of the administrative judgment
of the Commission. The Circuit Court of Appeals, without supporting
evidence in the record as to any specific items, said that there
are obviously other expenses which the shipper must bear over and
above the actual rental paid. If this were so, the reflection of
those expenses, as well as the rental itself, in the allowance paid
by the carrier to the shipper for the use of the latter's cars
would be a matter for the administrative judgment of the
Commission, and not for determination by a court. [Footnote 14
We have said that the Commission insists the District Court was
without jurisdiction of the cause. With this we do not agree. The
action was an ordinary one in assumpsit on a written contract. The
court had jurisdiction of the subject matter and of the parties.
But it appeared here, as it did in Mitchell Coal & Coke Co.
v. Pennsylvania R. Co., 230 U. S. 247
that the question of the reasonableness and legality of the
practices of the parties was subjected by the Interstate Commerce
Act to the administrative authority of the Interstate Commerce
Commission. The policy of the Act is that reasonable allowances and
practices, which shall not offend against the prohibitions of the
Elkins Act, are to be fixed and settled after full investigation by
the Commission, and that there is remitted to the courts only the
Page 308 U. S. 433
enforcing claims arising out of the failure to comply with the
Commission's lawful orders.
When it appeared in the course of the litigation that an
administrative problem, committed to the Commission, was involved,
the court should have stayed its hand pending the Commission's
determination of the lawfulness and reasonableness of the practices
under the terms of the Act. There should not be a dismissal, but,
as in Mitchell Coal & Coke Co. v. Pennsylvania R. Co.,
the cause should be held pending the conclusion of an
appropriate administrative proceeding. Thus, any defenses the
petitioner may have will be saved to it. [Footnote 15
The judgment of the Circuit Court of Appeals is reversed, and
the cause is remanded to the District Court for further proceedings
in conformity to this opinion.
Act of February 19, 1903, c. 708, § 1, 32 Stat. 847, as
"(3) Receiving rebates; additional penalty and recovery
Any person, corporation, or company who shall deliver
property for interstate transportation to any common carrier,
subject to the provisions of sections 41, 42, or 43 of this title,
or for whom as consignor or consignee, any such carrier shall
transport property from one State, Territory, or the District of
Columbia to any other State, Territory, or the District of
Columbia, or foreign country, who shall knowingly by employee,
agent, officer, or otherwise, directly or indirectly, by or through
any means or device whatsoever, receive or accept from such common
carrier any sum of money or any other valuable consideration as a
rebate or offset against the regular charges for transportation of
such property, as fixed by the schedules of rates provided for in
said sections, shall in addition to any penalty provided by said
sections forfeit to the United States a sum of money three times
the amount of money so received or accepted and three times the
value of any other consideration so received or accepted, to be
ascertained by the trial court, and the Attorney General of the
United States is authorized and directed, whenever he has
reasonable grounds to believe that any such person, corporation, or
company has knowingly received or accepted from any such common
carrier any sum of money or other valuable consideration as a
rebate or offset as aforesaid, to institute in any court of the
United States of competent jurisdiction, a civil action to collect
the said sum or sums so forfeited as aforesaid, and in the trial of
said action all such rebates or other considerations so received or
accepted for a period of six years prior to the commencement of the
action, may be included therein, and the amount recovered shall be
three times the total amount of money, or three times the total
value of such consideration, so received or accepted, or both, as
the case may be."
U.S.C. Tit. 49, § 41(3).
104 F.2d 903, 916.
U.S.C. Tit. 49, § 15(13).
49 U.S.C. § 1(3).
49 U.S.C. § 1(10)(11); Pennsylvania R. Co. v. Puritan Coal
Co., 237 U. S. 121
Pennsylvania R. Co. v. Sonman Shaft Coal Co., 242 U.
Ellis v. Interstate Commerce Comm'n, 237 U.
In the Matter of Private Cars, 50 I.C.C. 652.
"Allowance for service or facilities furnished by
-- If the owner of property transported under this
chapter directly or indirectly renders any service connected with
such transportation, or furnishes any instrumentality used therein,
the charge and allowance therefor shall be no more than is just and
reasonable, and the commission may, after hearing on a complaint or
on its own initiative, determine what is a reasonable charge as the
maximum to be paid by the carrier or carriers for the services so
rendered or for the use of the instrumentality so furnished, and
fix the same by appropriate order, which order shall have the same
force and effect and be enforced in like manner as the orders above
provided for under this section."
49 U.S.C. § 15(13).
49 U.S.C. § 6(1)(7).
49 U.S.C. § 15(13), supra, note 8
Compare Interstate Commerce Comm'n v. Diffenbaugh,
222 U. S. 42
222 U. S.
Use of Privately Owned Refrigerator Cars, 201 I.C.C. 323.
Great Northern Ry. Co. v. Merchants' Elevator Co.,
259 U. S. 285
259 U. S.
Mitchell Coal & Coke Co. v. Pennsylvania R. Co.,
230 U. S. 247
Morrisdale Coal Co. v. Pennsylvania R. Co., 230 U.
Compare Morrisdale Coal Co. v. Pennsylvania R. Co.,
230 U. S. 304
230 U. S. 314
where no rights could be saved by retaining the cause, and St.
Louis, B. & M. Ry. Co. v. Brownsville Nav. Dist.,
304 U. S. 295
304 U. S. 301
where the District Court was asked to make an order which the
Commission alone had authority to make.