clude that adequate remuneration would result from the general operation of the rates in force, even allowing for any loss occasioned by the running of the extra train in question, it follows that the order would not be unreasonable, even if tested by the doctrine announced in Smyth v. Ames and kindred cases." § 95. Value of Service. The shipper cannot ordinarily pay more than the service is worth; consequently, from economic necessity, as well as from a consideration of what is just, the value of the service must constitute the maximum charge. Rates should be proportioned to the value of the service to the shipper.511 The value of the commodity enters into the value of the service, and consequently must also be considered in determining what constitutes a reasonable rate.512 That the 511 Delaware State Grange v. New York, etc. R. Co., 4 I. C. C. 588, 3 I. C. R. 554, 561; Loud v. South Carolina R. Co., 5 I. C. C. 529, 4 I. C. R. 205, citing cases; Loftus v. Pullman Co., 18 I. C. C. 135, 140, difference in value of service between upper and lower Pullman berths. See, also, Re Suspension of Western Classification No. 51, 25 I. C. C. 442, at pp. 472, 474, discussing principles of classification. 512 The principle that the value of a particular commodity must be considered in determining what is a reasonable rate thereon, is one which has been applied throughout the histery of the Interstate Commerce Commission. Evans v. O. R. N. Co., 1 I. C. C. 325; Howell v. N. Y. L. E. & W. R. Co., 2 I. C. C. 272, 285, 1 I. C. R. 162; Thurber v. N. Y. C. & H. R. Co., 3 I. C. C. 473, 503, 2 I. C. R. 742; Re Excessive Rates on Food Products, 4 I. C. C. 48; Buchanan v. N. P. R. Co., 5 I. C. C. 7; Colorado F. & I. Co. v. S. P. Co., 6 I. C. C. 488, 489; Grain Shippers Asso. v. L. S. & M. S. R. Co., 9 I. C. C. 264, 286; Georgia Peach Growers Asso. v. A. C. L. R. Co., 10 I. C. C. 255, 277; Tift v. So. Ry. Co., 10 I. C. C. 548; National Machinery Co. v. P. C. C. & St. L. R. Co., 11 I. C. C. 581, 584; Society American Florists v. U. S. Express Co., 12 I. C. C. 120, 125; Re Released Rates, 13 I. C. C. 550; Union Pac. Tea Co. v. P. R. R. Co., 14 I. C. C. 545, 547; Darling v. B. & O. R. Co., 15 I. C. C. 78, 81; Union Made Garment Mfr's Asso. v. C. & N. W. Ry. Co., 16 I. C. C. 405, 407; Metropolitan Paving Brick Co. v. A. A. R. Co., 17 I. C. C. 197, 205; Forest City Freight Bureau v. A. A. R. Co., 18 I. C. C. 205, 206; Re Reduced Rates on Returned Shipments, 19 I. C. C. 409; Ford Co. v. M. C. R. R. Co., 19 I. C. C. 507, 509; Advances in Rates, Western Case 1910, 20 I. C. C. 307, 355, where Mr. Lane said: "To be sure, we can never depart from the ad valorem principle in rate making;" Investigation of Advances in Rates on Grain, 21 I. C. C. 22, 30, 35; Investigation & Suspension Docket, 26 to 26c (Coal Rates), 22 I. C. C. 604, 623; Minneapolis Traffic Asso. v. C. & N. W. Ry. Co., 23 I. C. C. 432, 437; Bancroft-Whitney Co. v. C. N. O. & T. P. Ry. Co., 24 I. C. C. 557, 558; Bern interests of the public are important in determining the reasonableness of charges by public service corporations, has been announced by the Supreme Court as an established principle in rate-making. Mr. Justice Harlan says:513 The public can not properly be subjected to unreasonable rates in order simply that stockholders may earn dividends." This view is further supported by the case of Smyth v. Ames,514 where it was said: "It can not be admitted that a railroad corporation maintaining a highway under the authority of the state may fix its rates with a view solely to its own interests, and ignore the rights of the public. The rights of the public would be ignored if rates for the transportation of persons or property on a railroad are exacted without reference to the fair value of the property used for the public or the fair value of the services rendered." In San Diego Land & Town Co. v. National City,515 the Supreme Court reviewed and approved the case and reiterated the principle of the importance of considering "fair value of the services rendered." * The value of the service may mark the boundary beyond which rates may not ordinarily go, but the rule cannot be at all times applied. The Commission has held that a difference heim v. O. R. & Nav. Co., 25 I. C. C. 156, 158; Union Tannery Co. v. S. Ry. Co., 26 I. C. C. 159, 163, where Mr. Commissioner Clements clearly and forcibly states the principle; Dixie Dairy Men's Asso. v. Y. & M. V. R. Co., 27 I. C. C. 618, 621; Scrap Iron Rates, 28 I. C. C. 525; Parde Works v. C. R. R. Co., 29 I. C. C. 500, where value was under the facts therein, limited to the hazard; but this opinion is not in accord with the general views of the Commission as elsewhere expressed; Reversed 39 I. C. C. 162; Rates on Flax seed 29 I. C. C. 633, 636; Molasses Rates to Knoxville 30 I. C. C. 313, 314; Railroad Com. of Montana v. B. A. & P. Ry. Co., 31 I. C. C. 641, 652; Five Per Cent. Case, 31 I. C. C. 351, 419; Nebraska State Ry. Com. v. C. V. R. Co., 32 I. C. C. 41, 44; Anson Gilkey & Hurd Co., v. S. P. Co., 33 I. C. C. 332, 339, 341; Des Moines Commodity Rates, 34 I. C. C. 281, 288; Western Rate Advance Case 1915, 35 I. C. C. 497, 606; Southeastern Sugar Investigation, 48 I. C. C. 739; Southern Class Rate Investigation, 100 I. C. C. 513; Fertilizers Between Southern Points, 113 I. C. C. 389. See also Int. Com. Com. v. Chicago Great W. R. Co., 141 Fed. 1003, 1015 and cases cited; Northern Pac. R. Co. v. North Dakota, 236 U. S. 585, 59 L. Ed. 735, 35 Sup. Ct. 429. 513 Covington & L. Turnpike Road Co. v. Sandford, 164 U. S. 578, 596, 41 L. Ed. 560, 566, 17 Sup. Ct. 198. 514 Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418. 515 San Diego Land & Town Co. v. National City, 174 U. S. 739, 43 L. Ed. 1154, 19 Sup. Ct. 804. in the value of two car loads of peaches would not justify a higher rate on the more valuable car.516 This is true because it is impracticable to know the exact value of the service in any case, and, as will be frequently seen throughout this chapter, rate-making is not subject to unalterable theoretical rules. Judge Bethea517 says of the rule: "This is considered an ideal method, when not interfered with by competition or other factors. This method is considered practical and is based on an idea similar to taxation." Kirkman, in The Science of Railways, vol. 8, pp. 42, 43, writing from the standpoint of a trained railway man, says: * * * "A prime factor in determining the rates carriers charge, is the value of the service to the shipper. This is the basis of remuneration for labor in every field of industry. Any other would be oppressive, if not prohibitory. Its operation involves the exercise of discrimination. But discrimination is the instinct of trade, its intelligent, directing and governing force. The ignorant, the vicious, and the superficial speak of it, when exercised by railroads, as something oppressive, something to be discountenanced. This is because they do not consider the analogies of trade, or its merits. The charges of carriers cannot be disproportionate to the thing handled. If more is charged than I can reasonably pay, it prohibits me from doing business; but if I am charged what I can afford, I am not treated unjustly, so long as the general profits of the seller are not unreasonable. It is not an act of injustice to me that a carrier charges a higher rate for my blooded horse than for my neighbor's mule, although they both occupy the same space. I cannot afford to pay the same rate for the brick used in the construction of my house that I can for the carpets that cover its floors. Rates are based on discriminations of this kind, at once practicable, necessary, and wise." This statement is correct as stating a general rule, but the rule is subject to many modifications. His illustration of the blooded horse and the mule is not a safe application of the rule. That a horse may be worth ten or twenty times as much 516 Georgia Peach Growers Asso. v. Atlantic C. L. R. Co., 10 I. C. C. 255. 517 Int. Com. Com. v. Chicago G. W. R. Co., 141 Fed. 1003, 1015, Noyes, Am. R. R. Rates, p. 53; Int. Com. as a mule makes the transportation service for moving the horse more valuable than for moving the mule; but, when the horse is worth only a little more than the mule, it would be impossible, as a practical matter, to grade the relative rates. Differences in value on the same kind of commodity, unless other differentiating circumstances are also present, can rarely be practically applied in rate-making. Value of service is more a limitation on rates than a reason for increasing rates. Neither a high nor low value is controlling, but value should always be considered; not only because of the hazard, presently to be discussed, but because the worth of a service increases somewhat with the value of the commodity transported. While the Transportation Act, 1920, Sec. 15a, gives emphasis to the cost of service, it is yet true: "Cost of transportation may be said to determine the minimum rate that may be charged as, on the other hand, the value of the service to the shipper marks the maximum of a reasonable rate or charge. '518 § 96. Use to Which Commodity is Put.-Mere difference in value or use of a different species of the same general class of commodities, furnishes no reason for divergent rates. The Commission has said:519 "It may be fairly said in conclusion that the carriers in this case show no sufficient justification whatsoever for discriminating between the three kinds of fire-clay brick involved in this proceeding. The brick themselves are so nearly alike in color that, being the same size and of the same weight, they are practically indistinguishable the one from the other. To make different rates on each of these brick is virtually to permit the shipper to declare which of the three rates he chooses to impose upon the freight. The receiving agent of the railroad, unless an expert in fire-clay brick, could not tell which of the three rates to impose upon any one of 518 Bituminous Coal in C. F. A. Territory, 46 I. C. C. 66, 112, and cases cited. See also Nashville Tie Co. v. L. & N. R. Co., 40 I. C. C. 377, 381 and cases cited. Eastbound Transcontinental Canned Goods, 50 I. C. C. 62, 66. 519 Stowe-Fuller Co. v. Pennsylvania Co., 12 I. C. C. 215, 220; Metropolitan Paving Brick Co. v. Ann Arbor R. Co., 17 I. C. C. 197. the three varieties, except by inquiring what use was to be made of these brick. Aside from the difficulty in learning what use the brick were to be put to upon reaching their destination, we cannot regard a classification as scientific, or a difference in rates as well based, which is altogether founded upon a distinction that has no transportation significance. "Moreover, such a differentiation, if permitted and extended throughout the various classes of freight handled by railroads, would lead to an almost endless multiplication of rates, which could find no excuse save in the use which might be made of the article transported. One class of lumber of the same measurement and of the same value and of the same general appearance and of the same weight as another might be given a distinct and separate rate. And so with building stone and cement and steel in certain forms, and many other commodities which will readily suggest themselves. Classification must be based upon a real distinction from a transportation standpoint; and we can find no such distinction between these three classes of brick, which are made of the same material and come out of the same kiln, as justifies a difference in rates. To hold otherwise would be to promote false billing on the part of the shippers, and to require the carriers, if they would avoid the penalty of the law, to make a practically impossible examination into the use to which each shipment of these brick was put." The subject is extensively discussed in Re Restricted Rates,520 and the conclusion stated "that the carrier has no right to attempt to dictate the uses to which commodities transported by it shall be put in order to enjoy a transportation rate." In the course of the opinion, Conference Ruling 34 was quoted as follows: "A tariff providing for reduced rates on coal used for steam purposes, or that the carrier will refund part of the regular 520 Re Restricted Rates, 20 I. C. C. 426. See also Carter White Lead Co. v. Norfolk & W. Ry. Co., 21 I. C. C. 41; Ohio Allied Milk Product Shippers v. Erie R. Co., 21 I. C. C. 522, 527; Re Rates on R. R. Fuel & Other Coal, 36 I. C. C. 1; Association of Union Made Garment Mfrs. of America v. Chicago & N. W. R. Co., 16 I. C. C. 405; Whitcomb v. Chicago & N. W. Ry. Co., 15 I. C. C. 27; Northbound Rates on Hardwood, 32 I. C. C. 521. |