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DAYTON-GOOSE CREEK RY. CO. V. ICC, 263 U. S. 456 (1924)

U.S. Supreme Court

Dayton-Goose Creek Ry. Co. v. ICC, 263 U.S. 456 (1924)

Dayton-Goose Creek Railway Company

v. Interstate Commerce Commission

No. 330

Argued November 16, 19, 1923

Decided January 7, 1924

263 U.S. 456


1. The power of Congress to regulate interstate commerce includes the power to foster, protect, and control it, with proper regard for the welfare of those who are immediately concerned as well as of the public at large. P. 263 U. S. 478.

2. Section 422 of the Transportation Act 1920, by the new section, 15a, added by it to the Interstate Commerce Act, directs the Interstate Commerce Commission: to establish rates which will enable the carriers, as a whole, or by rate groups or territories fixed by the Commission, to receive a fair net operating return upon the property they hold in the aggregate for use in transportation (par. 2); to establish from time to time the percentage of the value of the aggregate property constituting a fair operating return, the act, however, fixing it for the years 1920 and 1921 at 5%, with discretion in the Commission to add one-half of 1% as a fund for adding betterments on capital account (par. 3), and to fix from time to time such aggregate property value. The said § 15a provides further that, because it is impossible to establish uniform rates on competitive traffic adequate to sustain all the carriers needed for the business without giving some an income in excess of a fair return, any carrier receiving such excess shall hold it as trustee for the United States (par. 5); that such excess shall be distributed, one-half to the carrier as a reserve fund, the other half to a general railroad revolving fund, to be maintained by the Commission (par. 6); that the carrier may use such reserve to pay dividends, interest on securities, or rent for leased roads to the extent that its net operating income for any year is less than 6% (par. 7), and whenever such reserve equals 5% of the value of its property, and while it so continues, the carrier's one-half of excess

Page 263 U. S. 457

income may be used for any lawful purpose (par. 8); that the general revolving fund shall be administered by the Commission in making loans to carriers to meet expenditures on capital account, to refund maturing securities originally issued on capital account, and for buying equipment and facilities and leasing or selling them to carriers (pars. 10-17).


(a) The provisions for "recapture" and use of excess income are essential to the plan of the act, which aims for an efficient national transportation system, and therein seeks to maintain uniform rates, for all shippers, as a means of distributing traffic and avoiding congestion on the stronger railroads, while keeping the net returns of the railroads, whether strong or weak, to the varying percentages that are fair for them respectively. P. 263 U. S. 479.

(b) Rates which, as a body, enable all the railroads necessary to do the business of a rate section, to enjoy not more than a fair net operating income on the aggregate value of their properties therein economically and efficiently operated are, in their general level, reasonable from the standpoint of the individual shipper in that section. P. 263 U. S. 480.

(c) The statute leaves the reasonableness of each particular rate open to inquiry independently of the net return to the carrier from all. Pp. 263 U. S. 480-483.

(d) A railroad, however strong financially, economical in facilities, or favorably situated as to traffic is not entitled as of constitutional right to more than a fair net operating income upon the value of its properties devoted to transportation. P. 263 U. S. 481.

(e) Decisions holding that the fact that the revenue of a carrier from both local and interstate commerce gave a fair profit was irrelevant to the question whether the intrastate rates were unreasonably high or low do not make against the use of a fair return of operating profit as a standard of reasonableness of rates when the issue respects the general level of all the rates received by the carrier. P. 263 U. S. 483.

(f) The net operating profit accruing to a carrier from its whole rate structure is relevant evidence in determining whether the sum of the rates is fair to the carrier; reduction of excessive profit, as provided by the act, is tantamount to reducing the rates proportionately before collection. P. 263 U. S. 483.

(g) Under the statute, excess income is taken in trust, and the carrier never has such a title to it as to render its recapture by the government a taking without due process in violation of the Fifth Amendment. P. 263 U. S. 484.

Page 263 U. S. 458

(h) Inasmuch as the part of the excess income retained by the government belongs equitably to neither carriers nor shippers, it may properly be devoted by the government, as the act provides, to help the weaker railroads more effectively to discharge their public duties. P. 263 U. S. 484.

(i) The recapture clause does not, by reducing net income from intrastate rates, invade the reserved power of the states, in violation of the Tenth Amendment, but, in view of its relation to the plan and national purpose of the act, is within the power of Congress over interstate commerce. P. 263 U. S. 485.

(j) Absence of provision in the act itself for judicial hearing on the fairness of the return is not a constitutional objection, since the steps prescribed amount to a direct and indirect legislative fixing of rates, and resort to the courts on the question of confiscation is left open under Jud.Code §§ 208, 211. P. 263 U. S. 485.

(k) Limitation of the return to 6%, on the property of a public utility is not necessarily confiscatory. P. 263 U. S. 486.

(l) In this case, the issue of confiscation, not having been raised in the complaining carrier's bill, is not before the Court, but, semble, that 8% on the property value reported by the carrier, remaining to it after paying the one-half excess income to the Commission, is not confiscatory. P. 263 U. S. 486.

(m) To attack the return allowed upon the ground that the property valuation upon which it was computed was too low, the bill should allege the true values. P. 263 U. S. 486.

(n) Whether the property values reported by a carrier to the Commission, upon which its net income was calculated, were understated is a question of fact, to be decided, primarily, at least, by the Commission, and which cannot be considered by the Court when the carrier has not invoked the Commission's decision upon it. P. 263 U. S. 487.

287 F. 728, affirmed.

Appeal from a decree of the district court which dismissed a bill brought by the appellant Railway Company attacking the constitutionality of orders made by the Interstate Commerce Commission under the Transportation Act and praying that the United States, the Commission and a United States district attorney be enjoined from prosecuting civil or criminal actions to enforce the orders.

Page 263 U. S. 474

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