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Opinion of the Court.

236 U.S.

Corp., $ 1201; Freund, Police Power, $ 551; 3 Encyc. Sup. Ct. Rep. 632. Int. Comm. Comm. v. Un. Pac. Ry., 222 U. S. 541, is not opposed to these cases.

The intrastate business of the carriers as a whole produced a fair return.

Classification of rates is proper and within the power of the State. 2 Wyman, § 1232; Beale & Wyman, $ 554; Tift v. Southern Ry., 138 Fed. Rep. 264.

Allowance should be made for the fact that coal is one of the lowest classes of freight and cheapest to transport. Louis. & Nash. R. R. v. Wilson, 132 Indiana, 517; Trade Leagues v. Phila., Wil. & Balt. Ry., 8 I. C. C. 386; Am. Ins. Co. v. Chi. & Alt. Ry., 74 Mo. App. 89; Hayes v. Railway Co., 12 Fed. Rep. 309.

Shipments in carload lots should be at low rates.

In this case of coal in carload lots the revenues exceed actual outlay and there is a contribution towards expenses which would have existed even if there had been no coal hauled.

The rate was fixed as a declaration of public policy in favor of a domestic industry and the general welfare of the State. Gladson v. Minnesota, 166 U. S. 427.

The burden of showing that the rates are confiscatory is on the carrier.

MR. JUSTICE HUGHES delivered the opinion of the court.

By Chapter 51 of the Laws of 1907, the legislature of North Dakota fixed maximum intrastate rates, graduated according to distance, for the transportation of coal in carload lots. It was further provided that in case the transportation was over two or more lines of railroad it should be considered as one haul, the compensation for which should be divided among the carriers according to their agreement or, if they could not agree, as the railroad

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commissioners should decide subject to appeal to the courts. While the statutory rates governed all coal shipments, their practical application was almost solely to lignite coal.

The carriers refused to put the rates into effect, and in August, 1907, the Attorney General of the State began proceedings in its Supreme Court to obtain a mandatory injunction against the Northern Pacific Railway Company, the Minneapolis, St. Paul & Sault Ste. Marie Railway Company and the Great Northern Railway Company. The companies answered that the statute violated the Commerce Clause of the Federal Constitution, and also that it infringed the Fourteenth Amendment by fixing rates that were 'unremunerative,' 'unreasonable, and 'confiscatory. The Supreme Court of the State, overruling these contentions, granted the injunction. 19 N. Dak. 45. It was held that the evidence was not sufficient to overcome the presumption in favor of the rates. On writ of error from this court, the decree was affirmed without prejudice to the right of the railroad companies to reopen the case after an adequate trial of the rates. 216 U. S. 579.

This decision was rendered in the early part of the year 1910 and thereupon the rates were put into effect. After a trial for over a year, the case was reopened, voluminous testimony was taken and the Supreme Court of the State, making its separate findings of fact as to the effect of the rates in the intrastate business of each carrier, and stating its conclusions of law, entered judgment commanding the carriers to keep the rates in force. 26 N. Dak. 438. The Northern Pacific Railway Company and the Minneapolis, St. Paul & Sault Ste. Marie Railway Company have sued out these writs of error.

The period to which the testimony relates is the fiscal year ending June 30, 1911. The facts may be thus summarized:

Opinion of the Court.

236 U. S.

Northern Pacific Railway Company.

The total revenue received by this company for the intrastate carriage of lignite coal for the fiscal year was $58,953.07. It was also deemed to be practicable to ascertain the amount of expense properly chargeable to this traffic. Upon this point, the court said: “As a result of the painstaking work of the accounting department of this railway company, and its endeavors to render all the assistance possible in determining the matter of the apportionment of expense to this commodity, as is evidenced by the care and detail in the accounting, the information furnished by the exhibits, and that the books of the company have been thrown open to the experts of the State, we are enabled to arrive, with a reasonable degree of certainty, at the proper proportion of expense that should be chargeable against the revenue received from the carriage of this commodity.” 26 N. Dak., p. 446.

With respect to the division of some of the items of expense (maintenance of way and structures, and taxes), there was no dispute, and, as to the others, the range of controversy was narrow. The company contended that the traffic in question produced at the statutory rates a loss of $2,253.65; the State insisted that it yielded a profit of $2,391.63. After a detailed analysis, the state court found the charges against the revenue received from the lignite traffic to be: (1) For train operation expense, $30,850.12; (2) switching, $4,971; (3) station service, $4,182.58; (4) freight car repairs, renewals, and depreciation, $7,121.54; (5) traffic and general expenses (no loss and damage allowed), $1,456.14; (6) maintenance of way and structures, $7,119.93; (7) taxes, $2,424.15; making the total expenses, $58,125.46, and the surplus income, $827.61. Id., pp. 460, 461. The summary of the findings of fact, is as follows:

“That, as to the Northern Pacific Railway Company, out of total freight receipts for lignite coal, amounting to

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$58,953, the total cost of transportation, or out-of-pocket costs, together with all fixed or overhead expenses apportionable to said lignite traffic, consumed all of said receipts excepting $847, its net profit in the handling of the lignite business for the twelve months in question. That such rate is slightly remunerative, but in fact noncompensatory, considering the volume of freight carried and the property of the railroad devoted thereto.Id.,

p. 439.

Minneapolis, St. Paul & Sault Ste. Marie Railway Company.

The state court regarded the statistics furnished by this company as being in the main estimates without satisfactory bases. Still, on making an elaborate examination of the facts disclosed by the record-all the testimony adduced in the three cases being available in each one so far as pertinent—and on taking judicial notice of certain local conditions, the court was able to find sufficient proof to justify it in determining that under the statutory rates the intrastate transportation of lignite coal was conducted by this company at a loss. Id., pp. 461-472. A large part of the traffic, after a short haul, was delivered to connecting carriers—the Northern Pacific and Great Northern lines—and the pro-rating of the statutory compensation for the entire haul operated injuriously. As to this part, said to be ‘nearly half the lignite business,' this road was 'virtually a branch line of the other two railroads in accumulating for them their lignite traffic.' It was found, further, that the value of the railway property within the State had not been established, nor had the portion of value attributable to the intrastate business been determined; and, also, that the carriage of lignite coal increased 'the railroad expenses but sixty per cent. of the usual statutory rate for the lignite haul,' that is, that this percentage of the rate covered the 'out-of-pocket cost of the traffic, the remaining expenses in this view being such as

Opinion of the Court.

236 U.S.

would have been incurred had no lignite coal been transported.

The gross receipts from the intrastate traffic in question during the fiscal year were $83,670. The final results of the court's analysis in the case of this company are thus epitomized:

“Its total receipts amount to more than its actual outof-pocket costs, or actual costs of transportation, but are from $9,000 to $12,000 less than the total costs including fixed and overhead expenses properly chargeable to the carriage of this commodity and against the earnings therefrom. That the carriage of lignite coal by the Soo line within this State during said fiscal year was not only nonprofitable, but occasioned a loss to it when its fixed expenses apportionable to all traffic are in proper proportion and amount assigned to and charged against the earnings from this commodity.Id., p. 439.

In answer to the contention of the State that the company could not be heard to complain with respect to the disadvantage of the prorating with connecting carriers, inasmuch as the basis was agreed upon without an appeal to the board of railroad commissioners, the court said that it was difficult to see what other basis could have been taken, and, further, that the result, in substance, would have been the same. The amount which could thus have been gained, it was said, would have been taken ‘from the net revenues of the Northern Pacific carrier principally,' and would have been insufficient to have given to the Minneapolis, St. Paul & Sault Ste. Marie company a net profit, so that all the difference in fact would have been that both Soo and Northern Pacific would be then hauling this freight at less than the gross cost, including, of course, out-of-pocket and all fixed charges.' id., p. 483.

We understand that all the ‘fixed charges,' to which the findings refer, are actual expenses which, while including taxes, do not include any return whatever upon the in

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