§ 317. Accommodation of the interests of both sought.

The effort of the law therefore is to accommodate the more or less conflicting interests of the companies and of the public. How difficult this problem is may be seen from the language of a judge 12 who has given this matter much thought: "Then, their reasonableness relates to both the company and the customer. Rates must be reasonable to both, and, if they cannot be to both, they must be to the customer. That the amount of investment does not control either way is decided in San Diego Land & Town Company v. Jasper,13 and Stanislaus County v. San Joaquin, etc., Co.14 In the former case the court said that the rule that the company is entitled to demand a fair return upon the reasonable value of the property at the time it is being used for the public 'is decided as against the contention that you are to take the actual cost of the plant, annual depreciation, etc., and to allow a fair profit on that footing over and above expenses.' And in the latter the court said, 'To take the amount actually invested into 'estimation' does not mean necessarily that such amount is to control the decision of the question of rates.' So that, while it is strictly true that the company is entitled to no more than a reasonable return upon its necessary investment, which is embodied in the structure and its natural increment, if any, that goes but a little way towards the solution of the problem, owing to the difficulty of saying just what is reasonable in a given case. That must, for the most part, be left to the good judgment of the tribunal which passes upon each particular case." 15

12 Savage, J., in Brunswick & T. W. Dist. v. Maine Water Co., 99 Me. 371, 59 Atl. 537 (1904).

13 189 U. S. 439, 23 Sup. Ct. 571, 47 L. Ed. 892.

14 192 U. S. 201, 24 Sup. Ct. 241, 48 L. Ed. 406.

15 Compare the similarly cautious language employed by Harlan, J., in Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418, B. & W. 347 (1898), affirming 64 Fed. 165 (1896).

§ 318. When fair net earnings left, notwithstanding reduction of particular rates.

The rate on a single class of freight may be reasonable, though it is more or less than the average rate, and though it 'would, if applied to all freight, produce more or less than a fair return to the railroad company. In the case of Minneapolis and St. Louis Railroad v. Minnesota 16 the plaintiff railroad attacked as unconstitutional a rate fixed by the railroad commission for the carriage of coal. The railroad did not claim that the reduction of this rate alone would deprive it of a fair return, but only that if the reduced rate were applied to all freights the income of the road would be insufficient. The court held the rate legal, notwithstanding this fact. Mr. Justice Brown said: "Notwithstanding the evidence of the defendant that if the rates upon all merchandise were fixed at the amount imposed by the commission upon coal in carload lots, the road would not pay its operating expenses, it may well be that the existing rates upon other merchandise, which are not disturbed. by the commission, may be sufficient to earn a large profit to the company, though it may earn little or nothing upon coal in carload lots. In Smith v. Ames17 we expressed the opinion that the reasonableness or unreasonableness of rates prescribed by a state for the transportation of persons or property wholly within its limits must be determined without reference to the interstate business done by the carrier, or the profits derived from it, but it by no means follows that the companies are entitled to earn the same percentage of profits upon all classes of freight carried. It often happens that, to meet competition from other roads at particular points, the companies themselves fix a disproportionately low rate upon certain classes of freight consigned to these points. The right to permit this to be done is expressly re

16 186 U. S. 257, 46 L. Ed. 1151, 22 Sup. Ct. 901 (1902), affirming 80 Minn. 191, 83 N. W. 60 (1900).

17 169 U. S. 466, 541, 42 L. Ed. 819, 847, 18 Sup. Ct. 418, 432, B. & W. 347, 350 (1898), affirming 64 Fed. 165 (1896).

served to the Interstate Commerce Commission by section 4 of that act, notwithstanding the general provisions of the long and short haul clause, and has repeatedly been sanctioned by decisions of this court. While we never have decided that the commission may compel such reductions, we do not think it beyond the power of the state commission to reduce the freight upon a particular article, provided the companies are able to earn a fair profit upon their entire business, and that the burden is upon them to impeach the action of the commission in this particular.

"In exercising its power of supervising such rates the commision is not bound to reduce the rates upon all classes of freight, which may perhaps be reasonable, except as applied to a particular article; and if, upon examining the tariffs of a certain road, the commission is of opinion that the rate upon a particular article, or class of freight, is disproportionately or unreasonably high, it may reduce such rate, notwithstanding that it may be impossible for the company to determine with mathematical accuracy the cost of transportation of that particular article as distinguished from all others. Obviously such a reduction could not be shown to be unreasonable simply by proving that, if applied to all classes of freight, it would result in an unreasonably low rate." 18

TOPIC B-THE PARTICULAR RATES CONSIDERED SEPARATELY.

§ 319. Reasonableness of the separate rates.

The question of the reasonableness of any separate rate is a much more complex one. The individual shipper ought not to pay more than his fair share of the whole amount received by the carrier; and what his fair share may be depends upon the nature of the goods carried, the expense of carrying them as compared with the carriage of other goods, and other similar

18 Accord. Chicago & N. W. Ry. v. Dey, 35 Fed. 866, 1 L. R. A. 744 (1888); Pensacola & At. R. R. v. Florida, 27 Fla. 403, 5 So. 833 (1889).

considerations. On the other hand, fairness to the shipper requires that under no circumstances should he be forced to pay a rate greater than the value of the service rendered to him by the carrier, and this involves a determination of the value to him individually of the carriage, and also of the cost to the carrier of the particular carriage. It is obvious that all these considerations, which taken together enter into a determination of the reasonableness of the separate rate are rather vague, and that it will in the ordinary case be a matter of great difficulty to determine the question.1

1 That the separate rates charged particular persons by a public service company must not be unfair to the person served is well established. UNITED STATES SUPREME COURT:

Union Pacific Ry. v. U. S., 99 U. S. 402, 25 L. Ed. 274 (1878), reversing 13 Ct. Cl. 401; Chicago & G. T. Ry. v. Wellman, 143 U. S. 339, 36 L. Ed. 176, 12 Sup. Ct. 400 (1892), affirming 83 Mich. 592, 47 N. W. 489; Union Pac. Ry. v. Goodridge, 149 U. S. 680, 37 L. Ed. 896, 13 Sup. Ct. 970 (1893), affirming 37 Fed. 182; Covington & Lexington Turnpike Road Co. v. Sanford, 164 U. S. 596, 41 L. Ed. 561, 17 Sup. Ct. 198 (1896), reversing 20 S. W. 1031; Smyth v. Ames, 169 U. S. 466, 42 L. Ed. 819, 18 Sup. Ct. 418, B. & W. 347 (1898), affirming 64 Fed. 165; Minneapolis and St. Louis R. R. v. Minnesota, 186 U. S. 257, 46 L. Ed. 1151, 22 Sup. Ct. 901 (1902), affirming 80 Minn. 191, 83 N. W. 60 (1900); San Diego & T. Co. v. Jasper, 189 U. S. 439, 47 L. Ed. 892, 23 Sup. Ct. 571 (1903), affirming 110 Fed. 702.

FEDERAL COURTS:

Wells v. Oregon Ry. & Nav. Co., 15 Fed. 561 (1883); Interstate Com. Com. v. Lehigh Ry., 74 Fed. 784, appeal withdrawn, 82 Fed. 1002, 27 C. C. A. 681 (1897); Atlantic & P. Ry. v. U. S., 76 Fed. 186 (1896); Milwaukee Electric Ry. Co. v. Milwaukee, 87 Fed. 577, B. & W. 336 (1898); Interstate Com. Com. v. Louisville & N. R. R., 118 Fed. 613 (1902). STATE COURTS:

California-Spring Valley W. W. v. San Francisco, 82 Cal. 286, 23 Pac. 910 (1890); Redlands' L. & C. D. Water Co. v. Redlands, 121 Cal. 363, 53 Pac. 843 (1898).

Colorado-Wheeler v. Northern Colo. Irr. Co., 10 Colo. 582, 17 Pac. 487, 3 Am. St. Rep. 603, B. & W. 301 (1887).

Florida State v. Seaboard Air Line (Fla.), 37 So. 658 (1904). Illinois-Clinton Electric L. H. & P. Co. v. Snell, 196 Ill. 626, 63 N. E. 1082 (1902).

320. Value of the service to the person served.

It is highly desirable, if not indispensible, that no more should be charged the individual patron than the service is worth to him. This principle is acutely stated in Brunswick & Topeham Water District v. Marine Water Company2 by Mr. Justice Savage: "The second requested instruction is that: "The rule that the public-that is, the customers-may demand that the rates shall be no higher than the services are worth to them, not in the aggregate, but as individuals, is to be invoked only for the protection of the public, and that in a case requiring its application it may result in reducing rates, even if reasonable within the rule stated in the foregoing request; never in raising rates otherwise fair to the company." We understand the purport of this request to be that a public service company cannot lawfully charge, in any event, inore than the services are reasonably worth to the public as individuals, even if charge so limited would fail to produce a fair return to the company upon the value of its property or investment. Such, we think, is the law. We have already so stated in the discussion of the preceding request. In the Waterville case we said: The public—that is, the customers may demand that the rates shall be no higher than the services are worth to them, not in the aggregate, but

3

Maine-State v. Edwards, 86 Me. 102, 29 Atl. 947, 41 Am. St. Rep. 528, 25 L. R. A. 127 (1893); Kennebec Water Dist. v. Waterville, 97 Me. 185, 54 Atl. 6, 60 L. R. A. 856 (1902); Brunswick & T. W. Dist. v. Maine Water Co., 99 Me. 371, 59 Atl. 537 (1904).

Michigan-Grand Haven v. Grand Haven Water Works, 119 Mich. 652, 78 N. W. 890 (1899).

Minnesota-Steenerson v. Great No. Ry., 69 Minn. 353, 72 N. W. 713, B. & W. 333 (1897); State v. Minneapolis & St. L. Ry., 186 U. S. 257, affirming 80 Minn. 191, 83 N. W. 60, 89 Am. St. Rep. 514 (1900).

Mississippi-Alabama & V. Ry. v. Railroad Commission (Miss.), 38 So. 356 (1905).

North Carolina-North Carolina Corp. Com. v. Atl. Coast Line R. Co. (N. C.), 49 S. E. 191 (1904).

2 99 Me. 371, 59 Atl. 537 (1904).

3 At page 202, 97 Me. page 20, 54 Atl., 60 L. R. A. 856.