Hoboken and Seatrain entered into a contract dated November 21, 1932 (subsequent to the purchase of Hoboken's stock by Seatrain, although negotiations had been commenced prior to the purchase) which provided, in respect to freight transported by Hoboken and consigned for delivery to Seatrain, that delivery should be considered to be completed by Hoboken when the cars had been placed upon the cradle. Under the contract Seatrain had the right, upon its request, to have Hoboken place the cars at some convenient point near the cradle, and Seatrain itself was then to place the cars on the cradle as Hoboken's agent. By other provisions of the contract Hoboken authorized Seatrain, as its agent, to take the cars from the cradle. The contract provided also that Hoboken would pay Seatrain 40 per ton of freight (other than coal) loaded into, or discharged from, the Seatrain ships in cars.
By a later contract between Hoboken and Seatrain, dated February 24, 1937, effective as of March 1, 1937, it was provided that Hoboken would pay Seatrain 73 per ton (subject to possible revisions because of increases or decreases in the scale of longshoremen's wages) on all freight interchanged between them shipped on lighterage-free rates, and that Hoboken would pay Seatrain nothing on freight shipped on non-lighterage-free rates. Under this contract, Seatrain does not move the cars to or from the cradle. This service is performed by Hoboken.
The justification asserted by Hoboken for the sums paid by it to Seatrain is that, as the Seatrain appliances make it unnecessary to load or unload freight, the trunk line railroads are relieved of the expense of 75 per ton for which they ordinarily reimburse Hoboken when freight is moved under lighterage-free rates to or from water carriers other than Seatrain. Hoboken claims that since the trunk line carriers get these advantages by reason of Hoboken's contract with Seatrain, the savings effected should accrue to Hoboken and not to the trunk line carriers.
Under the contract of 1937, Seatrain charges Hoboken 73 for the Seatrain devices when used on lighterage-free freight. This would leave Hoboken 2 out of the 75 , which Hoboken alleges it should receive under a new division of the $7 through-rate. If Hoboken's contentions were to prevail, it would be able to operate at a profit. Otherwise, Hoboken will operate (as it has in the past) at a loss. The Commission indicated, however, that if Hoboken had not made the 73 payment it would have operated at a profit, averaging the years 1936 and 1937.
Part of the Commission's report is devoted to a discussion of the various elements which compose Hoboken's necessary operating expenses and its income. Seatrain leases the Seatrain pier and slip from Hoboken. The rental is based on Hoboken's expenditures. These include rent, taxes, insurance, depreciation, repairs, maintenance and dredging, plus an estimated return of 6% on Hoboken's investment in the property. The crane which handles the cradles also is leased by Seatrain from Hoboken. Its original cost was about $85,000. The rental for all of the foregoing for the year beginning March 1, 1937, the effective date of the later contract, was about $33,000.
It appears from the Commission's report that Hoboken paid Seatrain $110,000 in 1936, pursuant to the provisions of the 1932 contract; that in 1937 Hoboken paid Seatrain approximately $100,000. The cars that moved between Hoboken and Seatrain under lighterage-free rates were about 50% of all the cars moving between Seatrain and Hoboken. It follows that Hoboken paid Seatrain nothing for about 50% of the cars, viz., those that moved under non-lighterage-free rates.
The Commission concludes that the record before it warrants the finding that the former division of 60 and the present divisions of 63 and 66 a ton on lighterage-free freight are sufficient to cover the cost of the services performed by Hoboken and also constitutes a reasonable return on the property owned or used by Hoboken in performing such service. The Commission goes on to say, and we think correctly, that the service that the railroads hold themselves out to perform under the lighterage-free rates includes the unloading of inbound cars and the placing of the lading within reach of the ship's tackle and a corresponding but reverse service in connection with outbound freight. Placing the cars upon the cradle or removing them therefrom satisfies all those requirements.
The Commission dismissed the complaint holding that the 75 charge was not properly a transportation charge and that it could not be justified as a legitimate factor contributing to the efficiency of Hoboken's operation.
Hoboken has appealed to this court alleging that the order of the Commission was based upon errors in law in disregarding the contract between Hoboken and Seatrain, that the findings of the Commission are not supported by evidence, and that the order results in a confiscation of Hoboken's property without due process of law.
We have jurisdiction to review the order of the Commission. The Commission's determinations upon matters of fact are binding, but the court may set aside the order if the parties were not accorded a fair and complete hearing, or if the findings of the Commission are not supported by evidence, or if the rate established by the Commission results in a deprivation of property without due process of law. Interstate Commerce Commission v. Union Pacific R.R. Co., 222 U.S. 541, 547, 32 S. Ct. 108, 56 L. Ed. 308; Florida East Coast Ry. Co. v. United States, 234 U.S. 167, 34 S. Ct. 867, 58 L. Ed. 1267; St. Joseph Stockyards Co. v. United States, 298 U.S. 38, 51, 56 S. Ct. 720, 80 L. Ed. 1033.
There is here no contention that the proceedings before the Commission were not fair and adequate in every way.
Admittedly the Commission as the trier of fact must determine the point at which the transportation service of the railroad is completed and, if the Commission's finding in this respect is supported by substantial evidence, the parties and this court are bound upon it. The question of where transportation by rail ends is an administrative question. Atchison, T. & S.F. Ry. v. United States, 295 U.S. 193, 201, 55 S. Ct. 748, 79 L. Ed. 1382; United States v. American Sheet & Tin Plate Company, 301 U.S. 402, 57 S. Ct. 804, 81 L. Ed. 1186; United States v. Pan American Petroleum Corporation, 304 U.S. 156, 58 S. Ct. 771, 82 L. Ed. 1262. Even though we might reach a different conclusion, if there is evidence to support the Commission's findings, its order must be sustained. New England Divisions Case, 261 U.S. 184, 204, 43 S. Ct. 270, 67 L. Ed. 605; Seaboard Airline Ry. Co. v. United States, 254 U.S. 57, 62, 41 S. Ct. 24, 65 L. Ed. 129. The finding by the Commission that rail transportation ends at the cradle when Hoboken has put the car consigned for Seatrain upon it and begins at the cradle when the movement is reversed is fully supported by the evidence. The contract of November 21, 1932, between Hoboken and Seatrain expressly so provided, and the contract of February 24, 1937, now in force between Hoboken and Seatrain, makes no substantial change in this respect although Hoboken makes Seatrain its agent to put the cars upon and take them off the cradle. Since, as the Commission determined, transportation ends at the cradle, Hoboken completes its obligation under the lighterage-free tariff when it delivers the cars to the cradle. The Commission, therefore, held that the payments by Hoboken to Seatrain do not constitute a legitimate transportation cost. Upon this finding, supported by evidence, its judgment is final. United States v. Pan American Petroleum Corporation, 304 U.S. 156, 58 S. Ct. 771, 82 L. Ed. 1262.
In its report the Commission found that, "While, therefore, the payments are not made for any service which the rail lines perform under the lighterage-free rate, there is a remaining question whether such payments may be justified, in any way and to any extent as compensation properly payable to Seatrain for the savings which it has accomplished for the rail lines by its new method of transfer. The new method of transfer puts the connecting rail lines to less expense under the lighterage-free rates than the old method. It may be argued, therefore, that they would be justified in making any payments that might be necessary for the purpose of inducing the establishment of the new method of transfer provided they were left with a net saving. There is no evidence, however, that payments were or are necessary for this purpose. The contract between Seatrain and complainant, to which defendant rail lines are not parties, is not evidence to this effect, in view of the control which Seatrain exercises over complainant. No such payments have, so far as the record shows, been exacted or obtained by Seatrain from an independent rail connection. There is ample reason to conclude, also, that the improved method of transfer is only an incident to the Seatrain plan of transportation, and that this plan has sufficient advantages to impel its use and promotion by Seatrain regardless of any contributory payments from rail connections."
Admittedly the contract between Seatrain and Hoboken should be examined carefully because of the corporate relationship. Lindheimer v. Illinois Telephone Co., 292 U.S. 151, 156, 54 S. Ct. 658, 78 L. Ed. 1182; Pittsburgh & W.V. Ry. Co. v. United States, D.C., 41 F.2d 806, 811. Also, Seatrain does not exact payments from the railroads with which it interconnects at Havana and New Orleans. Hoboken asserts, however, that if Seatrain were to demand such payments from the United Railways of Havana, the latter's revenue from traffic with Seatrain would be less than that received from its traffic with break-bulk carriers. The location of the terminal at Belle Chasse saves Seatrain approximately 17 miles of travel in each direction and this, according to Hoboken, is sufficient to compensate for the lack of contributory payments. The Commission did not determine the validity of the contract, but dismissed the entire question of the contract payments on the theory that Hoboken would receive the same interconnecting facilities irrespective of the payments.
However, the issue at bar is not predicated solely upon Hoboken's legitimate costs. The entire inquiry should be directed to securing "a fair and equitable division" of the rates. Conceding arguendo that the contract between Hoboken and Seatrain does not constitute a valid obligation to be considered in determining Hoboken's costs, that does not necessarily mean that there is no obligation upon Hoboken to make some payment for the interconnection which saves Hoboken the labor and costs of loading and unloading freight. The Commission should have determined the quantum meruit of the relationship. It is possible that there was no service or relationship of value. Even such a finding would not necessarily result in a dismissal of the complaint. If there is a windfall in the case at bar by reason of Hoboken's right under its contract to use the Seatrain devices to fulfill its obligations of carriage, the Commission should determine that fact and also an equitable basis for division of the windfall between Hoboken and the trunk line carriers. This the Commission has failed to do by appropriate findings.
Whereas the burden of proof in attacking an established rate rests upon the complainant, Interstate Commerce Commission v. Nashville, C. & St. L. Ry. Co., 5 Cir., 120 F. 934, the instant case was brought to determine a new division since previous agreements did not cover the novel facts of the Seatrain method of interchange. The agreement which Hoboken had had with the trunk line carriers since 1920 provides that the divisions shall be as follows:
"Carloads loaded or un-
loaded by HMRR (Hobo-
ken) or at its expense $1.35 per ton
"Carloads loaded or un-
loaded by shipper or con-
signee at their expense $ .60 per ton" n6
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