United States Kansascity Southern Railway Company v. Interstate Commerce Commission/Opinion of the Court

The Act of Congress of March 1, 1913 (37 Stat. 701), amending the 'Act to Regulate Commerce,' imposed the duty upon the Interstate Commerce Commission (section 19a [Comp. St. § 8591]) to 'investigate, ascertain, and report the value of all the property owned or used by every common carrier subject to the provisions of this act.' Specifying the steps to be taken in the performance of the general duties thus imposed, the same section commanded as follows:

'First. In such investigation said Commission shall ascertain     and report in detail as to each piece of property owned or      used by said carrier for its purposes as a common carrier, *      *  * the cost of reproduction new, the cost of reproduction      less depreciation, and an analysis of the methods by which      these several costs are obtained, and the reason for their      differences, if any. * *  *

'Second. Such investigation and report shall state in detail     and separately from improvements the original cost of all      lands, rights of way, and terminals owned or used for the      purposes of a common carrier, and ascertained as of the time      of dedication to public use, and the present value of the      same, and separately the original and present cost of      condemnation and damages or of purchase in excess of such      original cost or present value. * *  *

'Fifth * *  * [seventh paragraph]. Whenever the Commission     shall have completed the tentative valuation of the property      of any common carrier, as herein directed, and before such      valuation shall become final, the Commission shall give      notice by registered letter to the said carrier, *  *  *      stating the valuation placed upon the several classes of property of said carrier, and shall allow thirty      days in which to file a protest of the same with the      Commission. * *  *

'If notice of protest is filed the Commission shall fix a     time for hearing the same, and shall proceed as promptly as      may be to hear and consider any matter relative and material      thereto. * *  * All final valuations by the commission and the      classification thereof shall be published and shall be prima      facie evidence of the value of the property in all      proceedings under the Act to Regulate Commerce as of the date      of the fixing thereof, and in all judicial proceedings for      the enforcement of the act approved February 4, 1887,      commonly known as 'the Act to Regulate Commerce,' and the      various acts amendatory thereof, 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.'

Pursuant to these requirements the Commission proceeded to investigate and report the value of the property of the Kansas City Southern Railway Company. Upon completing a tentative valuation, the Commission gave the notice required by the statute to the railway company, which thereupon filed a protest against such valuation on the ground that in making it the Commission had failed to consider and include the 'present cost of condemnation and damages or of purchase in excess of such original cost or present value.' Upon the subject of the protest, the railway company took a large amount of testimony and much was also taken by the Commission, both parties having incurred considerable expense in the matter.

Pending this situation, in order that the excessive expense of taking each individual parcel and showing what it would cost to acquire it or a right of way over it by purchase or condemnation might be avoided, an agreement was entered into between the Director of the Bureau of Valuation of the Commission, C. A. Prouty, and the railway company, that in the event the Commission should decide that evidence upon the cost of acquiring land by purchase or condemnation would be received by it, the Bureau of Valuation would recommend to the Commission the percentage or multiplier of the naked value of the land, to be used for the purpose of reaching the railway cost of acquiring the same.

At that time there was also pending a protest concerning a tentative valuation made by the Commission as to the property of the Texas Midland Railroad Company, raising the same question as to error committed in failing to carry out the provisions of the statute concerning the present cost of condemnation, etc., in which case the Commission overruled the protest, holding that the provision of the statute in question was not susceptible of being enforced or acted upon for reasons stated by the Commission in part as follows (I. C. C. Val. Rep. 1, p. 54 et seq.):

'However, the direction in paragraph 'Second' for the     ascertainment of the present cost of condemnation and damages      or of purchase in effect calls for a finding as to the cost      of reproduction of these lands. Must this be done, and can     this be done? It seems elementary that the cost of     reproduction can be estimated only by assuming that the thing      in question is to be produced again, and that if it is to be      produced again, it is to be taken as not existent. It seems     sophistry to contend that the lands of the railroad can be      produced again at a cost to the railroad without first making      the assumption that they are no longer lands of the railroad;      and this necessary assumption carries with it the mental      obliteration of the railroad itself.

'Considerable testimony was produced to the effect that in     the acquisition of a railroad right of way it is necessary      for the carrier to pay sums in excess of the value of the land if measured by the present or market value of      similar contiguous lands, and this because of the elements      which have been enumerated and embraced in the protest, such      as cost of acquisition, damages to the severed property, cost      of buildings and other improvements, accrued taxes and      various incidental rights. * *  *

'We are unable to distinguish between what is suggested by     the carrier in this record and nominally required by the act      and what was condemned by the court (in the Minnesota Rate      Cases [230 U.S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48, L.      R. A. (N. S.) 1151, Ann. Cas. 1916A, 18]) as beyond the     possibility of rational determination; nor is there any      essential difference in the actual methods there employed and      those now urged upon us. Before we can report figures as     ascertained, we must have a reasonable foundation for our      estimate, and when, as here, if the estimate can be made only      upon inadmissible assumptions, and upon impossible      hypotheses, such as those pointed out by the Supreme Court in      the opinion quoted, our duty to abstain from reporting as an      ascertained fact that which is incapable of rational      ascertainment, is clear. * *  *

'Because of the impossibility of making the     self-contradictory assumptions which the theory requires when      applied to the carrier's lands, we are unable to report the      reproduction cost of such lands or its equivalent, the      present cost of acquisition and damages, or of purchase in      excess of present value. The present value of lands as found     by us appears in the final valuation, appended hereto.'

Applying the ruling thus made to the protest which was pending in this case, the Commission gave notice to the railway that the agreement made with the Director of the Bureau of Valuation concerning the method of proof would be treated as not further operative; and thereafter when an offer was made by the railway before an examiner of the Commission of further testimony concerning the subject in hand, it was excluded because in conflict with the ruling announced in the Midland Case. The Commission sustained this action of the examiner on the ground that that officer had rightly held that the ruling in the Midland Case was controlling; and the Commission therefore decided that no further testimony on the particular subject would be heard in this case, and that it would make no report concerning that subject.

This suit was then brought to obtain a mandamus to compel the Commission to hear the proof and act upon it under the statute. The amended petition, after reciting the facts as we have outlined them and making the appropriate formal averments to justify resort to mandamus, alleged:

'That the refusal of respondent to investigate and find such     present cost of condemnation and damages or of purchase in      excess of original cost or present value of relator's lands      will result in great wrong and injury to relator; by way of      illustration, such refusal will result in a finding by      respondent of a value of but $60,000 with respect to parcels      of land acquired by relator by judicial award in condemnation      proceedings during four years immediately preceding such      valuation at an actual cost to relator of $180,000, and in      the aggregate will result in a finding with respect to said      lands at least $5,000,000 less than the value so directed by      the act of Congress above mentioned to be found.'

It was further averred, with considerable elaboration, that the petitioner stood ready to produce proof to meet the requirements of the statute which was neither speculative nor impossible to be acted upon, since it would conform to the character of proof usually received in judicial proceedings involving the exercise of eminent domain.

The Commission in its answer, either stating or conceding the history of the case as we have recited it, and summarily reiterating the grounds for the refusal by the Commission to receive the proof or report concerning it, challenged the right to the relief sought. A demurrer to the answer as stating no defense was overruled by the trial court, which denied relief without opinion. In the Court of Appeals, two judges sitting, the judgment of the trial court was affirmed by a divided court, also without opinion, and the case is here on writ of error to review that judgment.

It is obvious from the statement we have made, as well as from the character of the remedy invoked, mandamus, that we are required to decide, not a controversy growing out of duty performed under the statute, but one solely involving an alleged refusal to discharge duties which the statute exacts. Admonishing, as this does, that the issue before us is confined to a consideration of the face of the statute and the nonaction of the Commission in a matter purely ministerial, it serves also to furnish a ready solution of the question to be decided, since it brings out in bold contrast the direct and express command of the statute to the Commission to act concerning the subject in hand, and the Commission's unequivocal refusal to obey such command.

It is true that the Commission held that its nonaction was caused by the fact that the command of the statute involved a consideration by it of matters 'beyond the possibility of rational determination,' and called for 'inadmissible assumptions,' and the indulging in 'impossible hypotheses' as to subjects 'incapable of rational ascertainment,' and that such conclusions were the necessary consequence of the Minnesota Rate Cases, 230 U.S. 352, 33 Sup. Ct. 729, 57 L. Ed. 1511, 48 L. R. A. (N. S.) 1151, Ann. Cas. 1916A, 18.

We are of opinion, however, that, considering the face of the statute and the reasoning of the Commission, it results that the conclusion of the Commission was erroneous, an error which was exclusively caused by a mistaken conception by the Commission of its relation to the subject, resulting in an unconscious disregard on its part of the power of Congress and an unwitting assumption by the Commission of authority which it did not possess. And the significance which the Commission attibuted to the ruling in the Minnesota Rate Cases, even upon the assumption that its view of the ruling in those cases was not a mistaken one, but illustrates in a different form the disregard of the power of Congress which we have just pointed out, since, as Congress indisputably had the authority to impose upon the Commission the duty in question, it is impossible to conceive how the Minnesota Rate ruling could furnish ground for refusing to carry out the commands of Congress, the cogency of which consideration is none the less manifest, though it be borne in mind that the Minnesota Rate Cases were decided after the passage of the act in question.

Finally, even if it be further conceded that the subject-matter of the valuations in question which the act of Congress expressly directed to be made necessarily opened a wide range of proof and called for the exercise of close scrutiny and of scrupulous analysis in its consideration and application, such assumption, we are of opinion, affords no basis for refusing to enforce the act of Congress, or what is equivalent thereto, of exerting the general power which the act of Congress gave, and at the same time disregarding the essential conditions imposed by Congress upon its exercise.

The judgment of the Court of Appeals is therefore reversed, with directions to reverse that of the Supreme Court, and direct the Supreme Court to grant a writ of mandamus in conformity with this opinion.